<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MAY 16, 1997
1933 ACT REGISTRATION NO. 2-80543
1940 ACT REGISTRATION NO. 811-3605
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933 ( )
POST-EFFECTIVE AMENDMENT NO. 34 ( X )
AND/OR
REGISTRATION STATEMENT
UNDER THE
INVESTMENT COMPANY ACT OF 1940 ( )
AMENDMENT NO. 35 ( X )
(Check appropriate box or boxes)
____________________
THE BENCHMARK FUNDS
(Exact name of registrant as specified in charter)
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
(Address of principal executive offices)
(Registrant's Telephone Number, including Area Code)
800-621-2550
-----------------------------------
Michael J. Richman, Secretary with a copy to:
Goldman Sachs Asset Management W. Bruce McConnel, III
85 Broad Street Drinker Biddle & Reath
New York, NY 10004 Suite 1100
1345 Chestnut Street
Philadelphia, PA
19107-3496
(name and address of agent for service)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
(CHECK APPROPRIATE BOX)
( ) immediately upon filing pursuant to paragraph (b)
( ) on (date) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) On (date)pursuant to paragraph (a)(1)
(X) 75 days after filing pursuant to paragraph(a)(2) of Rule 485
( ) On (date) pursuant to paragraph (a)(2) of Rule 485
=================================================================
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has registered an indefinite number of its units of beneficial
interest under the Securities Act of 1933. On January 28, 1997, Registrant
filed a Rule 24f-2 Notice for its fiscal year ended November 30, 1996.
Registrant continues its election to register an indefinite number of units of
beneficial interest pursuant to Rule 24f-2 under the Investment Company Act of
1940, as amended.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 485)
<TABLE>
<CAPTION>
PART A
CAPTION
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<S> <C>
1. Cover Page Cover Page
2. Synopsis Summary of Expenses
3. Condensed Financial Not Applicable
Information
4. General Description Summary of Expenses; Investment
of Registrant Information; Organization
5. Management of the Fund Trust Information
6. Capital Stock and Trust Information; Investing;
Other Securities Net Asset Value; Organization
7. Purchase of Securities Trust Information; Investing;
Being Offered Net Asset Value
8. Redemption or Repurchase Investing
9. Pending Legal Proceedings Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B CAPTION
- ------ -------
<S> <C>
10. Cover Page Cover Page
11. Table of Contents Index
12. General Information Description of Units; Other
and History Information
13. Investment Objectives Investment Objectives and Policies;
Investment Restrictions
14. Management of the Fund Additional Trust Information--
Investment Adviser, Transfer Agent and
Custodian;-- Administrator and Distributor
15. Control Persons and Additional Trust Information--
Principal Holders Description of Units
16. Investment Advisory Additional Trust Information--
and Other Services Investment Adviser, Transfer Agent and
Custodian; Portfolio Transactions
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Description of Units
Other Securities
19. Purchase, Redemption and Description of Units;
Pricing of Securities Additional Trust Information--
Being Offered In-Kind Purchases
20. Tax Status Taxes
21. Underwriters Additional Trust Information--
Administrator and Distributor
22. Calculation of Performance Information
Performance Data
23. Financial Statements Financial Statements
</TABLE>
Part C
- ------
Information required to be included in Part C is set forth under the appropriate
Item, so numbered in Part C to this Registration Statement.
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent and Custodian:
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor:
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
The
Benchmark
Funds
The
Intermediate Bond
Portfolio
PROSPECTUS
, 1997
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--MAY 16, 1997
THE BENCHMARK FUNDS
(Advised by The Northern Trust Company)
-------------
THE NORTHERN TRUST COMPANY INVESTMENT ADVISER, TRANSFER AGENT AND
50 S. LaSalle Street CUSTODIAN
Chicago, Illinois 60675
312-630-6000
This Prospectus describes the Intermediate Bond Portfolio (the "Portfolio")
offered by The Benchmark Funds (the "Trust") to institutional investors. The
Intermediate Bond Portfolio seeks to maximize total return consistent with
reasonable risk. The Fund seeks to achieve its investment objective by
investing in a broad range of bonds and other fixed income securities and
maintaining a dollar-weighted average maturity of between 3 and 10 years.
The Portfolio is advised by The Northern Trust Company ("Northern"). Units of
the Portfolio are sold and redeemed without any purchase or redemption charge
imposed by the Trust, although Northern and other institutions may charge their
customers for services provided in connection with their investments.
This Prospectus provides information about the Portfolio that you should know
before investing. It should be read and retained for future reference. If you
would like more detailed information, a Statement of Additional Information
(the "Additional Statement") dated 1, 1997 is available upon request
without charge by writing to the Trust's distributor, Goldman, Sachs & Co.
("Goldman Sachs"), 4900 Sears Tower, Chicago, Illinois 60606 or by calling
1-800-621-2550.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE PORTFOLIO INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is 1, 1997.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY OF EXPENSES 3
- -------------------
INVESTMENT INFORMATION 5
- ----------------------
Introduction 5
Special Risks and Other Considera-
tions 5
Description of Securities and
Investment Techniques 7
Investment Restrictions 17
TRUST INFORMATION 17
- -----------------
Board of Trustees 17
Investment Adviser, Transfer Agent
and Custodian 17
Portfolio Manager 18
Administrator and Distributor 18
Unitholder Servicing Plan 19
Service Information 19
Expenses 20
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTING 20
- ---------
Purchase of Units 20
Redemption of Units 22
Distributions 24
Taxes 25
NET ASSET VALUE 26
- ---------------
PERFORMANCE INFORMATION 26
- -----------------------
ORGANIZATION 28
- ------------
MISCELLANEOUS 29
- -------------
</TABLE>
2
<PAGE>
SUMMARY OF EXPENSES
The following table sets forth certain information regarding the unitholder
transaction expenses imposed by the Trust and the estimated annualized
operating expenses the Portfolio expects to incur during the current fiscal
year. Hypothetical examples based on the table are also shown. Investors
should note that units of the Portfolio have been classified into four
separate classes, Class A, B, C and D units. Each class is distinguished by
the level of administrative support and transfer agency services provided.
Class A, B, C and D units represent pro rata interests in the Portfolio except
that different unitholder servicing fees and transfer agency fees are payable
by Class A, B, C and D units in the Portfolio. See "Trust Information--
Unitholder Servicing Plan."
<TABLE>
<CAPTION>
Intermediate Bond Portfolio(1)
-------------------------------
Class A Class B Class C Class D
Units Units Units Units
------- ------- ------- -------
<S> <C> <C> <C> <C>
Unitholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases.... None None None None
Deferred Sales Charge Imposed on Reinvested
Distributions............................... None None None None
Deferred Sales Charge Imposed on
Redemptions................................. None None None None
Redemption Fees.............................. None None None None
Exchange Fees................................ None None None None
Annual Operating Expenses After Expense
Reimbursements and Fee Reductions (as a
percentage of average daily net assets).
Management Fees After Fee Reductions(2)...... .25% .25% .25% .25%
12b-1 Fees................................... None None None None
Servicing Fees(3)............................ None .10% .15% .25%
Transfer Agency Fees(3)...................... .01% .05% .10% .15%
Other Expenses After Expense Reimbursements
and Fee Reductions(4,5)..................... .10% .10% .10% .10%
---- ---- ---- ----
Total Operating Expenses(2,3,4,5).......... .36% .50% .60% .75%
==== ==== ==== ====
Example of Expenses. Based on the foregoing
table, you would pay the following expenses
on a hypothetical $1,000 investment, assuming
a 5% annual return and redemption at the end
of each time period:
One Year..................................... $4 $5 $6 $8
Three Years.................................. $12 $16 $19 $24
</TABLE>
3
<PAGE>
- ----------
(1) Since the Portfolio does not yet have an operating history, the costs and
expenses included in the table and hypothetical example above are based on
estimated fees and expenses for the current fiscal year and should not be
considered as representative of past or future expenses. Actual fees and
expenses may be greater or less than those indicated.
(2) Northern has voluntarily agreed to reduce its advisory fee for the
Intermediate Bond Portfolio to .25% of the Portfolio's average daily net
assets for the current fiscal year (advisory fees are otherwise payable at
the annual rate of .60% of the Portfolio's average daily net assets).
(3) The Trust has adopted a Unitholder Servicing Plan pursuant to which the
Trust may enter into agreements with Institutions or other financial
intermediaries under which they render (or arrange to have rendered)
certain unitholder administrative support services for their Customers or
other Investors who beneficially own Class B, C and D units in return for
a fee ("Servicing Fee") of up to .10%, .15%, and .25%, respectively, per
annum of the value of the Portfolio's outstanding Class B, C and D units,
respectively. The Trust also allocates transfer agency fees, which are
attributable to the Class A, B, C and D units in the Portfolio, separately
to such units, as reflected in the table. For further information, see
"Investment Adviser, Transfer Agent and Custodian" and "Unitholder
Servicing Plan" under the heading "Trust Information" in this Prospectus.
(4) For the fiscal year ending November 30, 1997, Goldman Sachs is entitled to
an administration fee equal to .10% of the average daily net assets of the
Portfolio. In any fiscal year, Goldman Sachs has advised the Trust that it
intends to reimburse "Other Expenses" for the Portfolio (including fees
payable to Goldman Sachs as administrator, but excluding fees payable to
Northern for its duties as adviser and certain extraordinary expenses)
which exceed on an annualized basis .10% of the Portfolio's average daily
net assets for such fiscal year. The expense information in the table has,
accordingly, been presented to reflect the estimated fee reductions and
expense reimbursements.
(5) Without the undertakings of Northern and Goldman Sachs, it is estimated
that "Other Expenses" would be .46% and total annual operating expenses
for the Portfolio's Class A, B, C and D units would be 1.07%, 1.21%, 1.31%
and 1.46%, respectively, for the current fiscal year. See note (1) above.
For a more complete description of the Portfolio's expenses, see "Trust
Information" in this Prospectus.
----------------
THE PURPOSE OF THE FOREGOING TABLE IS TO ASSIST YOU IN UNDERSTANDING THE
VARIOUS UNITHOLDER TRANSACTION AND OPERATING EXPENSES OF THE PORTFOLIO THAT
UNITHOLDERS BEAR DIRECTLY OR INDIRECTLY. IT DOES NOT, HOWEVER, REFLECT ANY
CHARGES WHICH MAY BE IMPOSED BY NORTHERN, ITS AFFILIATES AND CORRESPONDENT
BANKS AND OTHER INSTITUTIONS ON THEIR CUSTOMERS AS DESCRIBED UNDER
"INVESTING--PURCHASE OF UNITS." THE EXAMPLE SHOWN ABOVE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RATE OF RETURN.
ACTUAL EXPENSES AND RATE OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN.
4
<PAGE>
INVESTMENT INFORMATION
INTRODUCTION
The Trust is an open-end management investment company registered under the
Investment Company Act of 1940 (the "1940 Act"). The Portfolio is a separate
pool of assets in the Trust with its own separate investment objective and
policies. The Portfolio is classified as a diversified investment company.
Units of the Portfolio have been classified into four classes--Class A units,
Class B units, Class C units and Class D units. Northern serves as investment
adviser, transfer agent and custodian. Goldman Sachs serves as distributor and
administrator. Except as expressly noted below, the investment objective and
policies of the Portfolio may be changed by the Board of Trustees of the Trust
without the approval of the unitholders of the Portfolio.
In pursuing its investment objective, the Intermediate Bond Portfolio invests
in a broad range of bonds and other fixed income securities. The Portfolio's
dollar-weighted average maturity will range between three and ten years.
The Portfolio will invest primarily in fixed income securities of all types
and in any proportion that generally are rated investment grade at the time of
purchase, and may include obligations of the U.S. Government, its agencies or
instrumentalities, obligations of foreign, state and local governments,
obligations of U.S. and foreign corporations and obligations of U.S. and
foreign banks. The obligations of a foreign issuer will not be purchased by
the Portfolio if, as a result of the purchase, more than 20% of the total
assets of the Portfolio will be invested in the obligations of issuers within
a single foreign country. The Portfolio may also invest up to 10% of its total
assets in non-investment grade securities. Under normal market conditions, at
least 65% of the Portfolio's total assets will be invested in bonds,
debentures, mortgage and other asset-related securities, zero coupon bonds and
convertible debentures. The Portfolio may also invest in short-term notes,
bills, commercial paper and certificates of deposits.
The Portfolio may enter into forward currency contracts and interest rate
swaps and may invest in options and futures contracts and related options. The
Portfolio may also invest in certain short-term fixed income securities as
cash reserves. See "Description of Securities and Investment Techniques" below
for more information.
SPECIAL RISKS AND OTHER CONSIDERATIONS
FOREIGN SECURITIES. The Portfolio may invest directly or indirectly in the
securities of foreign issuers, whether or not U.S. dollar-denominated. In
addition, the Portfolio may acquire the obligations of foreign banks and
foreign branches of U.S. banks as stated below under "Description of
Securities and Investment Techniques--Short-Term Obligations." There are
certain risks and costs involved in investing in securities of companies and
governments of foreign nations, which are in addition to the usual risks
inherent in U.S. investments. Foreign securities, and in particular foreign
debt securities, are sensitive to changes in interest rates and the interest
rate environment. In addition, investment in foreign debt, or the securities
of foreign governments, will subject the Portfolio to risks, including the
risk that foreign governments may default on their obligations, may not
respect the integrity of such debt, may attempt to renegotiate the debt at a
lower rate, and may not honor investments by United States entities or
citizens. The performance of investments in securities denominated in a
foreign currency will also depend, in part, on the strength of the foreign
currency against the U.S. dollar and the interest rate environment in the
country issuing the currency. Absent other events which could otherwise affect
the value of a
5
<PAGE>
foreign security (such as a change in the political climate or an issuer's
credit quality), appreciation in the value of the foreign currency generally
can be expected to increase the value of a foreign currency-denominated
security in terms of U.S. dollars. A rise in foreign interest rates or decline
in the value of the foreign currency relative to the U.S. dollar generally can
be expected to depress the value of a foreign currency-denominated security.
Investment in foreign securities also involves higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as the
imposition of additional taxes by foreign governments. Foreign investments may
also involve risks associated with the level of currency exchange rates, less
complete financial information about the issuers, less market liquidity, more
market volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls or freezes on the convertibility of
currency, or the adoption of other governmental restrictions might adversely
affect an investment in foreign securities. Additionally, foreign banks and
foreign branches of domestic banks may be subject to less stringent reserve
requirements, and to different accounting, auditing and recordkeeping
requirements.
In addition, there are other risks of investing in countries with emerging
economies or securities markets. These countries are located in the
Asia/Pacific region, Eastern Europe, Latin and South America and Africa.
Political and economic structures in many such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Some of these countries may have in the past failed to recognize
private property rights and may have at times nationalized or expropriated the
assets of private companies. As a result, the risks described above, including
the risks of nationalization or expropriation of assets, may be heightened.
While the Portfolio's investments may be denominated in foreign currencies,
the portfolio securities and other assets held by the Portfolio are valued in
U.S. dollars. Currency exchange rates may fluctuate significantly over short
periods of time causing, together with other factors, the Portfolio's net
asset value to fluctuate as well. Currency exchange rates can be affected
unpredictably by the intervention or the failure to intervene by U.S. or
foreign governments or central banks, or by currency controls or political
developments in the U.S. or abroad. The Portfolio's net long and short foreign
currency exposure will not exceed its total asset value. To the extent that
the Portfolio is fully invested in foreign securities while also maintaining
currency positions, it may be exposed to greater combined risk. The
Portfolio's net currency positions may expose it to risks independent of its
securities positions.
DERIVATIVE INSTRUMENTS. The Portfolio may also purchase certain "derivative"
instruments. "Derivative" instruments are instruments that derive value from
the performance of underlying assets, interest or currency exchange rates, or
indices, and include (but are not limited to) interest rate swaps, futures
contracts, options, forward currency contracts and structured debt obligations
(including collateralized mortgage obligations and other types of asset-backed
securities, "stripped" securities and various floating rate instruments,
including "inverse floaters"). Derivative instruments present, to varying
degrees, market risk that the performance of the underlying assets, exchange
rates or indices will decline; credit risk that the dealer or other
counterparty to the transaction will fail to pay its obligations; volatility
and leveraging risk that, if interest or exchange rates change adversely, the
value of the derivative instrument will decline more than the assets, rates or
indices on which it is based; liquidity risk that the Portfolio will be unable
to sell a derivative instrument when it wants because of
6
<PAGE>
lack of market depth or market disruption; pricing risk that the value of a
derivative instrument (such as an option) will not correlate exactly to the
value of the underlying assets, rates or indices on which it is based; and
operations risk that loss will occur as a result of inadequate systems and
controls, human error or otherwise. Some derivative instruments are more
complex than others, and for those instruments that have been developed
recently, data is lacking regarding their actual performance over complete
market cycles. Northern will evaluate the risks presented by the derivative
instruments purchased by the Portfolio, and will determine, in connection with
its day-to-day management of the Portfolio, how they will be used in
furtherance of the Portfolio's investment objectives. It is possible, however,
that Northern's evaluations will prove to be inaccurate or incomplete and,
even when accurate and complete, it is possible that the Portfolio will,
because of the risks discussed above, incur loss as a result of their
investments in derivative instruments.
AVERAGE MATURITY. The Portfolio will normally maintain the dollar-weighted
average maturity of its portfolio within the specified range as previously
described. The maturities of certain instruments, however, such as those
subject to prepayment or redemption by the issuers, are subject to estimation.
There can be no assurance that the estimates used by the Portfolio for such
instruments will, in fact, be accurate or that, if inaccurate, the Portfolio's
dollar-weighted average maturity will remain within the specified limits.
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
UNITED STATES GOVERNMENT OBLIGATIONS. The Portfolio may invest, to the extent
consistent with its investment policies, in a variety of U.S. Treasury
obligations consisting of bills, notes and bonds, which principally differ
only in their interest rates, maturities and time of issuance. The Portfolio
may also invest in other securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities consisting of bills, notes and
bonds, which principally differ only in their interest rates, maturities and
time of issuance. Obligations of certain agencies and instrumentalities, such
as the Government National Mortgage Association ("GNMA"), are supported by the
full faith and credit of the U.S. Treasury; others, such as those of the
Export-Import Bank of the United States, are supported by the right of the
issuer to borrow from the Treasury; others, such as those of the Federal
National Mortgage Association ("FNMA"), are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; still
others are supported only by the credit of the instrumentalities. No assurance
can be given that the U.S. Government would provide financial support to its
agencies or instrumentalities if it is not obligated to do so by law. There is
no assurance that these commitments will be undertaken or complied with in the
future.
Securities guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities are deemed to include (a) securities for which
the payment of principal and interest is backed by an irrevocable letter of
credit issued by the U.S. Government or an agency or instrumentality thereof,
and (b) participations in loans made to foreign governments or their agencies
that are so guaranteed. The secondary market for certain of these
participations is limited. Such participations will therefore be regarded as
illiquid.
CONVERTIBLE SECURITIES. The Portfolio may acquire convertible securities. A
convertible security is a security that may be converted either at a stated
price or rate within a specified period of time into a specified number of
shares of common stock. By investing in convertible securities, the Portfolio
seeks the opportunity, through the conversion feature, to participate in the
capital appreciation of the common stock into which the securities are
convertible, while earning higher current income than is available from the
common stock. Convertible securities
7
<PAGE>
acquired by the Portfolio will be subject to the same rating requirements as
the Portfolio's investments in its fixed income securities, or if unrated,
will be of comparable quality as determined by Northern in accordance with
guidelines approved by the Board of Trustees, except that the Portfolio may
acquire convertible securities rated below investment grade so long as the
Portfolio's investments in all non-investment grade securities does not exceed
the limitations set forth below under "Non-Investment Grade Securities." The
Portfolio will ordinarily sell units of common stock received upon conversion.
CORPORATE OBLIGATIONS. The Portfolio may purchase debt obligations of domestic
or foreign corporations subject to the Portfolio's minimum rating requirements
for purchases of debt securities. See discussion of "Investment Grade
Securities" and "Non-Investment Grade Securities" below.
INVESTMENT GRADE SECURITIES. The Portfolio may invest in fixed income
securities of all types and may invest a portion of its assets in convertible
securities. Such securities will generally be investment grade. Investment
grade securities include those securities which are rated BBB or higher by
Standard and Poor's Ratings Group ("S&P"), Baa or higher by Moody's Investors
Service, Inc. ("Moody's"), BBB or higher by Duff & Phelps Credit Rating Co.
("Duff") or BBB or higher by Fitch Investors Service, Inc. ("Fitch") at the
time of purchase, or if unrated, are of comparable quality as determined by
Northern. Securities rated BBB by S&P, Duff or Fitch, or Baa by Moody's have
certain speculative characteristics and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments than in the case of higher rated securities.
Commercial paper and other short-term obligations acquired by the Portfolio
will be rated A-2 or higher by S&P, P-2 or higher by Moody's, D-2 or higher by
Duff, or F-2 or higher by Fitch at the time of purchase or, if unrated,
determined to be of comparable quality by Northern. Subsequent to its purchase
by the Portfolio, a rated security may cease to be rated or its rating may be
reduced below the minimum rating required for purchase by the Portfolio.
Northern will consider such an event in determining whether the Portfolio
should continue to hold such security. In addition, the Portfolio may acquire
fixed income securities rated below investment grade when Northern believes
that the investment characteristics of such securities make them desirable
acquisitions. In either case, the Portfolio's total investment in non-
investment grade securities will not exceed the limitations set forth below
under "Non-Investment Grade Securities."
NON-INVESTMENT GRADE SECURITIES. Although the fixed income securities and
convertible securities in which the Portfolio may invest will normally be
rated investment grade at the time of purchase, the Portfolio may invest in
non-investment grade securities when Northern believes that the investment
characteristics of such securities make them desirable in light of the
Portfolio's investment objectives and current portfolio mix, so long as under
normal market and economic conditions, (i) no more than 10% of the total
assets of the Portfolio are invested in non-investment grade securities and
(ii) such securities are rated "B" or higher at the time of purchase by at
least one major rating agency, or if unrated will be of comparable quality as
determined by Northern. Non-investment grade securities (those that are rated
"Ba" or lower by Moody's or "BB" or lower by S&P, Duff or Fitch) are commonly
referred to as "junk bonds." To the extent that securities, including
convertible securities, acquired by the Portfolio are not rated investment
grade, there is a greater risk as to the timely repayment of the principal on,
and timely payment of interest or dividends with respect to, such securities.
Particular risks associated with lower-rated securities are (a) the relative
youth and growth of the market for such securities, (b) the sensitivity of
such securities to interest rate and economic changes, (c) the lower degree of
protection of principal and interest payments, (d) the relatively low trading
market liquidity for the securities, (e) the impact that legislation may have
on the high yield bond market (and, in turn, on the Portfolio's net asset
value and
8
<PAGE>
investment practices), and (f) the creditworthiness of the issuers of such
securities. During an economic downturn or substantial period of rising
interest rates, leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals, and to obtain additional
financing. An economic downturn could also disrupt the market for lower-rated
securities and adversely affect the value of outstanding securities and the
ability of the issuers to repay principal and interest. If the issuer of a
security held by the Portfolio defaulted, the Portfolio could incur additional
expenses to seek recovery.
FORWARD CURRENCY EXCHANGE CONTRACTS. The Portfolio may enter into forward
currency exchange contracts for hedging purposes and in an effort to reduce
the level of volatility caused by changes in foreign currency exchange rates
or where such transactions are economically appropriate for the reduction of
risks inherent in the ongoing management of the Portfolio.
A forward currency exchange contract is an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the
time of contract. Although such contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they
tend to limit any potential gain that might be realized should the value of
such currency increase. Consequently, the Portfolio may choose to refrain from
entering into such contracts. In connection with forward currency exchange
contracts, the Portfolio will create a segregated account of liquid assets in
accordance with applicable requirements of the Securities and Exchange
Commission (the "SEC").
OPTIONS. The Portfolio may write covered call options, buy put options, buy
call options and write secured put options for hedging (or cross-hedging)
purposes or for the purpose of earning additional income. Such options may
relate to particular securities, foreign or domestic securities indices,
financial instruments or foreign currencies and may or may not be listed on a
foreign or domestic securities exchange and issued by the Options Clearing
Corporation. The Portfolio will not purchase put and call options in an amount
that exceeds 5% of its net assets at the time of purchase. The aggregate value
of the Portfolio's assets that will be subject to options written by the
Portfolio will not exceed 25% of its net assets at the time the option is
written.
In the case of a call option on a security or currency, the option is
"covered" if the Portfolio owns the security or currency underlying the call
or has an absolute and immediate right to acquire that security or currency
without additional cash consideration (or, if additional cash consideration is
required, liquid assets in such amount are held in a segregated account by its
custodian) upon conversion or exchange of other securities or instruments held
by it. For a call option on an index, the option is covered if the Portfolio
maintains with its custodian a portfolio of securities substantially
replicating the movement of the index, or liquid assets equal to the contract
value. A call option is also covered if the Portfolio holds a call on the same
security, currency or index as the call written where the exercise price of
the call held is (i) equal to or less than the exercise price of the call
written, or (ii) greater than the exercise price of the call written provided
the difference is maintained by the Portfolio in liquid assets in a segregated
account with its custodian. Put options written by the Portfolio are "secured"
if the Portfolio maintains liquid assets in a segregated account with its
custodian in an amount not less than the exercise price of the option at all
times during the option period.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security or currency
gives the purchaser of the option the right to buy, and a writer the
obligation
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to sell, the underlying security or currency at the stated exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security or currency. The premium paid to the writer is in
consideration for undertaking the obligation under the option contract. A put
option for a particular security or currency gives the purchaser the right to
sell the security or currency at the stated exercise price to the expiration
date of the option, regardless of the market price of the security or
currency. In contrast to an option on a particular security, an option on an
index provides the holder with the right to make or receive a cash settlement
upon exercise of the option. The amount of this settlement will be equal to
the difference between the closing price of the index at the time of exercise
and the exercise price of the option expressed in dollars, times a specified
multiple.
The Portfolio will invest and trade in unlisted over-the-counter options only
with firms deemed creditworthy by Northern. However, unlisted options are not
subject to the protections afforded purchasers of listed options by the
Options Clearing Corporation, which performs the obligations of its members
which fail to perform them in connection with the purchase or sale of options.
FUTURES CONTRACTS AND RELATED OPTIONS. The Portfolio may invest in futures
contracts and options on futures contracts for hedging purposes, to increase
total return (i.e., for speculative purposes) or to maintain liquidity to meet
potential unitholder redemptions, invest cash balances or dividends or
minimize trading costs. The value of the Portfolio's contracts may equal or
exceed 100% of its total assets, although the Portfolio will not purchase or
sell a futures contract unless immediately after any such transaction the sum
of the aggregate amount of margin deposits on its existing futures positions
and the amount of premiums paid for related options entered into for other
than bona fide hedging purposes is 5% or less of its total assets.
Futures contracts obligate the Portfolio, at maturity, to take or make
delivery of certain domestic or foreign securities or the cash value of a
securities index. When used as a hedge, the Portfolio may sell a futures
contract in order to offset a decrease in the market value of its portfolio
securities that might otherwise result from a market decline or currency
exchange fluctuations. The Portfolio may do so either to hedge the value of
its portfolio of securities as a whole, or to protect against declines,
occurring prior to sales of securities, in the value of the securities to be
sold. Conversely, the Portfolio may purchase a futures contract as a hedge in
anticipation of purchases of securities. In addition, the Portfolio may
utilize futures contracts in anticipation of changes in the composition of its
portfolio holdings.
The Portfolio may purchase and sell call and put options on futures contracts
traded on a domestic or foreign exchange or board of trade. When the Portfolio
purchases an option on a futures contract, it has the right to assume a
position as a purchaser or seller of a futures contract at a specified
exercise price during the option period. When the Portfolio sells an option on
a futures contract, it becomes obligated to purchase or sell a futures
contract if the option is exercised. In connection with the Portfolio's
position in a futures contract or option thereon, the Portfolio will create a
segregated account of liquid assets, in accordance with applicable
requirements of the SEC.
The primary risks associated with the use of futures contracts and options
are: (i) imperfect correlation between the change in market value of the
securities held by the Portfolio and the price of futures contracts and
options; (ii) possible lack of a liquid secondary market for a futures
contract and the resulting inability to close a futures contract when desired;
(iii) losses due to unanticipated market movements which are potentially
unlimited; and
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(iv) Northern's ability to predict correctly the direction of securities
prices, interest rates, currency exchange rates and other economic factors.
For a further discussion see "Additional Investment Information--Futures
Contracts and Related Options" and Appendix B in the Additional Statement.
The Portfolio intends to comply with the regulations of the Commodity Futures
Trading Commission exempting the Portfolio from registration as a "commodity
pool operator."
INTEREST RATE SWAPS, FLOORS AND CAPS. The Portfolio may, in order to protect
its value from interest rate fluctuations and to hedge against fluctuations in
the floating rate market, enter into interest rate swaps or purchase interest
rate floors or caps. The Portfolio expects to enter into these hedging
transactions primarily to preserve a return or spread of a particular
investment or portion of its holdings and to protect against an increase in
the price of securities the Portfolio anticipates purchasing at a later date.
Interest rate swaps involve the exchange by the Portfolio with another party
of their respective commitments to pay or receive interest (e.g., an exchange
of floating rate payments for fixed rate payments). The purchase of an
interest rate floor entitles the purchaser, to the extent that a specified
index falls below a predetermined interest rate, to receive payments of
interest on a notional principal amount from the party selling such interest
rate floor. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate cap.
The net amount of the excess, if any, of the Portfolio's obligations over its
entitlements with respect to each interest rate swap will be accrued on a
daily basis and an amount of liquid assets having an aggregate net asset value
at least equal to such accrued excess will be maintained in a segregated
account by the Portfolio's custodian. If the other party to an interest rate
swap defaults, the Portfolio's risk of loss consists of the net amount of
interest payments that the Portfolio is contractually entitled to receive. The
Portfolio will not enter into any interest rate swap, floor or cap transaction
unless the unsecured commercial paper, senior debt, or claims paying ability
of the other party is rated either A or A-1 or better by S&P, Duff or Fitch,
or A or P-1 or better by Moody's.
SECURITIES LENDING. The Portfolio may seek additional income from time to time
by lending its portfolio securities on a short-term basis to banks, brokers
and dealers under agreements requiring that the loans be secured by collateral
in the form of cash, cash equivalents, U.S. Government securities or
irrevocable bank letters of credit maintained on a current basis equal in
value to at least the market value of the securities loaned. The Portfolio may
not make such loans in excess of 33 1/3% of the value of the Portfolio's total
assets. Loans of securities involve risks of delay in receiving additional
collateral or in recovering the securities loaned, or possible loss of rights
in the collateral should the borrower of the securities become insolvent. The
proceeds received by the Portfolio in connection with loans of portfolio
securities may be invested in U.S. Government securities and other liquid high
grade debt obligations.
FORWARD COMMITMENTS, WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS.
The Portfolio may purchase or sell securities on a when-issued or delayed-
delivery basis and make contracts to purchase or sell securities for a fixed
price at a future date beyond customary settlement time. Securities purchased
on a when-issued, delayed-delivery or forward commitment basis involve a risk
of loss if the value of the security to be purchased declines prior to the
settlement date. Conversely, securities sold on a delayed-delivery or forward
commitment basis involve the risk that the value of the security to be sold
may increase prior to the settlement date. The Portfolio is required to hold
and maintain liquid assets in a segregated account with the Portfolio's
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custodian until the settlement date having a value (determined daily) at least
equal to the amount of the Portfolio's purchase commitments. In the case of a
forward commitment to sell portfolio securities, the Portfolio is required to
hold the portfolio securities themselves in a segregated account with the
custodian while the commitment is outstanding. Although the Portfolio would
generally purchase securities on a when-issued, delayed-delivery or a forward
commitment basis with the intention of acquiring the securities, the Portfolio
may dispose of such securities prior to settlement if Northern deems it
appropriate to do so.
BORROWINGS. The Portfolio is authorized to make limited borrowings for
temporary purposes to the extent described below under "Investment
Restrictions." If the securities held by the Portfolio should decline in value
while borrowings are outstanding, the net asset value of the Portfolio's
outstanding units will decline in value by proportionately more than the
decline in value suffered by the Portfolio's securities. Borrowings may be
effected through reverse repurchase agreements under which the Portfolio would
sell portfolio securities to financial institutions such as banks and broker-
dealers and agree to repurchase them at a particular date and price. The
Portfolio may utilize reverse repurchase agreements when it is anticipated
that the interest income to be earned from the investment of the proceeds of
the transaction is greater than the interest expense of the reverse repurchase
transaction. See "Description of Securities and Investment Techniques--Reverse
Repurchase Agreements" below for additional information concerning reverse
repurchase agreements. For additional information on borrowings, see
"Additional Investment Information--Investment Restrictions" in the Additional
Statement.
SHORT-TERM OBLIGATIONS. Subject to the Portfolio's investment objective and
policies, the Portfolio may also invest in short-term U.S. government
obligations, high quality money market instruments and repurchase agreements,
pending investment, to meet anticipated redemption requests, or as a temporary
defensive measure. Such obligations may include those issued by foreign banks
and foreign branches of U.S. banks. See "Special Risks and Other
Considerations--Foreign Securities" above.
REPURCHASE AGREEMENTS. The Portfolio may agree to purchase portfolio
securities from financial institutions such as banks and broker/dealers which
are deemed to be creditworthy by Northern under guidelines approved by the
Board of Trustees subject to the seller's agreement to repurchase them at a
mutually agreed upon date and price ("repurchase agreements"). Although the
securities subject to a repurchase agreement may bear maturities exceeding one
year, settlement for the repurchase agreement will never be more than one year
after the Portfolio's acquisition of the securities and normally will be
within a shorter period of time. Securities subject to repurchase agreements
are held either by the Trust's custodian or subcustodian (if any), or in the
Federal Reserve/Treasury Book-Entry System. The seller under a repurchase
agreement will be required to maintain the value of the securities which are
subject to the agreement and held by the Portfolio in an amount that exceeds
the agreed upon repurchase price (including accrued interest). Default by or
bankruptcy of the seller would, however, expose the Portfolio to possible loss
because of adverse market action or delays in connection with the disposition
of the underlying obligations.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse repurchase
agreements which involve the sale of securities held by it, with an agreement
to repurchase the securities at an agreed upon price (including interest) and
date. The Portfolio will use the proceeds of reverse repurchase agreements to
purchase other securities either maturing, or under an agreement to resell, at
a date simultaneous with or prior to the expiration of the reverse repurchase
agreement. The Portfolio will utilize reverse repurchase agreements, which may
be viewed as borrowings (or leverage), when it is anticipated that the
interest income to be earned from the
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investment of the proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction. Reverse repurchase agreements
involve the risks that the interest income earned from the investment of the
proceeds of the transaction will be less than the interest expense of the
reverse repurchase agreement, that the market value of the securities sold by
the Portfolio may decline below the price of the securities the Portfolio is
obligated to repurchase and that the securities may not be returned to the
Portfolio. During the time a reverse repurchase agreement is outstanding, the
Portfolio will maintain a segregated account with the Trust's custodian
containing liquid assets having a value at least equal to the repurchase
price. The Portfolio may enter into reverse repurchase agreements with banks,
brokers and dealers, and has the authority to enter into reverse repurchase
agreements in amounts not exceeding in the aggregate one-third of the
Portfolio's total assets. See "Additional Investment Information--Investment
Restrictions" in the Additional Statement.
VARIABLE AND FLOATING RATE INSTRUMENTS. The Portfolio may purchase rated and
unrated variable and floating rate instruments. These instruments may include
variable amount master demand notes that permit the indebtedness thereunder to
vary in addition to providing for periodic adjustments in the interest rate.
The Portfolio may also invest in leveraged inverse floating rate debt
instruments ("inverse floaters"). The interest rate on an inverse floater
resets in the opposite direction from the market rate of interest to which the
inverse floater is indexed. An inverse floater may be considered to be
leveraged to the extent that its interest rate varies by a magnitude that
exceeds the magnitude of the change in the index rate of interest. The higher
degree of leverage inherent in inverse floaters is associated with greater
volatility in their market values. Accordingly, the duration of an inverse
floater may exceed its stated final maturity. Unrated variable and floating
rate instruments will be determined by Northern to be of comparable quality at
the time of the purchase to rated instruments which may be purchased by the
Portfolio.
The absence of an active secondary market with respect to particular variable
and floating rate instruments could make it difficult for the Portfolio to
dispose of the instruments if the issuer defaulted on its payment obligation
or during periods that the Portfolio is not entitled to exercise its demand
rights, and the Portfolio could, for these or other reasons, suffer a loss
with respect to such instruments. Variable and floating rate instruments
including inverse floaters held by the Portfolio will be subject to the
Portfolio's 15% limitation on illiquid investments when the Portfolio may not
demand payment of the principal amount within seven days absent a reliable
trading market.
INVESTMENT COMPANIES. In connection with the management of its daily cash
position, the Portfolio may invest in securities issued by other investment
companies which invest in short-term, high-quality debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method of valuation. In addition, the Portfolio may invest in
securities issued by other investment companies if otherwise consistent with
its investment objective and policies. As a shareholder of another investment
company, the Portfolio would bear, along with other shareholders, its pro rata
portion of the other investment company's expenses including advisory fees.
These expenses would be in addition to the advisory fees and other expenses
the Portfolio bears directly in connection with its own operations. To the
extent required by the 1940 Act and the regulations and orders of the SEC
thereunder, the Portfolio currently intends to limit its investments in
securities issued by other investment companies so that, as determined
immediately after a purchase is made, not more than 3% of the total
outstanding stock of any investment company will be owned by the Portfolio,
the Trust as a whole and their affiliated persons (as defined in the 1940
Act).
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ILLIQUID OR RESTRICTED SECURITIES. The Portfolio may invest up to 15% of its
net assets in securities which are illiquid. Illiquid securities would
generally include repurchase agreements and time deposits with
notice/termination dates in excess of seven days, unlisted over-the-counter
options and certain securities that are traded in the United States but are
subject to trading restrictions because they are not registered under the
Securities Act of 1933 (the "1933 Act"), interest rate swaps, stripped
mortgage-backed securities ("SMBS") issued by private issuers and guaranteed
investment contracts ("GICs").
If otherwise consistent with its investment objectives and policies, the
Portfolio may purchase domestically-traded securities which are not registered
under the 1933 Act but which can be sold to "qualified institutional buyers"
in accordance with Rule 144A under the 1933 Act. Any such security will not be
considered illiquid so long as it is determined by Northern, under guidelines
approved by the Board of Trustees, that an adequate trading market exists for
that security. This investment practice could have the effect of increasing
the level of illiquidity in the Portfolio during any period that qualified
institutional buyers become uninterested in purchasing these restricted
securities.
STRIPPED OBLIGATIONS. To the extent consistent with its investment objective
and policies, the Portfolio may purchase Treasury receipts and other
"stripped" securities that evidence ownership in either the future interest
payments or the future principal payments on U.S. Government and other
domestic and foreign obligations. These participations, which may be issued by
the U.S. Government (or a U.S. Government agency or instrumentality), foreign
governments or by private issuers such as banks and other financial
institutions, are issued at a discount to their "face value," and may include
SMBS, which are derivative multi-class mortgage securities. Stripped
securities, particularly SMBS, may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors.
CUSTODIAL RECEIPTS FOR TREASURY SECURITIES. The Portfolio may also purchase
participations in trusts that hold U.S. Treasury securities (such as TIGRs and
CATS) where the trust participations evidence ownership in either the future
interest payments or the future principal payments on the U.S. Treasury
obligations. Like other stripped securities, these participations are also
normally issued at a discount to their "face value," and may exhibit greater
price volatility than ordinary debt securities because of the manner in which
their principal and interest are returned to investors. Investments by the
Portfolio in such receipts will not exceed 5% of the value of the Portfolio's
total assets.
BANK OBLIGATIONS. The Portfolio may invest in domestic and foreign bank
obligations, including certificates of deposit, bank and deposit notes,
bankers' acceptances and fixed time deposits. Such obligations may be general
obligations of the parent bank or may be limited to the issuing branch or
subsidiary by the terms of the specific obligation or by government
regulation.
ASSET-BACKED SECURITIES. The Portfolio may purchase asset-backed securities
that are secured or backed by mortgages or other assets (e.g., automobile
loans, credit card receivables and other financial assets) and are issued by
entities such as GNMA, FNMA, FHLMC, commercial banks, financial companies,
finance subsidiaries of industrial companies, savings and loan associations,
mortgage banks, investment banks and certain special purpose entities. Asset-
backed securities acquired by the Portfolio will be rated BBB or better by
S&P, Duff or Fitch, or Baa or better by Moody's at the time of purchase or, if
not rated, will be determined by Northern to be of comparable quality. The
Portfolio will not purchase non-mortgage asset-backed securities that are not
rated by S&P, Duff, Fitch or Moody's.
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Presently there are several types of mortgage-backed securities that may be
acquired by the Portfolio, including guaranteed mortgage pass-through
certificates, which provide the holder with a pro rata interest in the
underlying mortgages, and collateralized mortgage obligations ("CMOs"), which
provide the holder with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-backed securities. Issuers of CMOs
ordinarily elect to be taxed as pass-through entities known as real estate
mortgage investment conduits ("REMICs"). CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. The relative payment rights of the various CMO classes may be structured
in a variety of ways. The Portfolio will not purchase "residual" CMO
interests, which normally exhibit greater price volatility.
The yield characteristics of asset-backed securities differ from traditional
debt securities. A major difference is that the principal amount of the
obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster
than expected prepayments will increase, while slower than expected
prepayments will decrease, yield to maturity. In calculating the average
weighted maturity of the Portfolio, the maturity of asset-backed securities
will be based on estimates of average life.
Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates; furthermore,
prepayment rates are influenced by a variety of economic and social factors.
In general, the collateral supporting non-mortgage asset-backed securities is
of shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. Like other fixed income securities, when interest
rates rise the value of an asset-backed security generally will decline;
however, when interest rates decline, the value of an asset-backed security
with prepayment features may not increase as much as that of other fixed
income securities.
EXCHANGE RATE-RELATED SECURITIES. The Portfolio may invest in securities for
which the principal repayment at maturity, while paid in U.S. dollars, is
determined by reference to the exchange rate between the U.S. dollar and the
currency of one or more foreign countries ("Exchange Rate-Related
Securities"). The interest payable on these securities is denominated in U.S.
dollars and is not subject to foreign currency risk and, in most cases, is
paid at rates higher than most other similarly rated securities in recognition
of the foreign currency risk component of Exchange Rate-Related Securities.
Investments in Exchange Rate-Related Securities entail certain risks. There is
the possibility of significant changes in rates of exchange between the U.S.
dollar and any foreign currency to which an Exchange Rate-Related Security is
linked. In addition, potential illiquidity in the forward foreign exchange
market and the high volatility of the foreign exchange market may from time to
time combine to make it difficult to sell an Exchange Rate-Related Security
prior to maturity without incurring a significant price loss.
GUARANTEED INVESTMENT CONTRACTS. The Portfolio may make limited investments in
guaranteed investment contracts ("GICs") issued by U.S. insurance companies.
Pursuant to such contracts, the Portfolio makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the Portfolio on a monthly basis interest which is based on an
index (in most cases this index is expected to be the Salomon Brothers CD
Index), but is guaranteed not to be less than a certain minimum rate. A GIC is
normally a general obligation of the issuing insurance company and not a
separate account. The purchase price paid for a GIC becomes part of the
general assets of the insurance company, and the contract is paid from the
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company's general assets. The Portfolio will only purchase GICs from insurance
companies which, at the time of purchase, have assets of $1 billion or more
and meet quality and credit standards established by Northern. Generally, GICs
are not assignable or transferable without the permission of the issuing
insurance companies, and an active secondary market in GICs does not currently
exist. Therefore, GICs will normally be considered illiquid instruments, and
will be subject to the Portfolio's limitation on investments in illiquid
securities.
PAIR-OFF TRANSACTIONS. Subject to the requirements of the 1940 Act, the
Portfolio may engage in pair-off transactions involving securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. In a
pair-off transaction Northern will commit to purchase or sell a security.
Then, prior to the settlement date, Northern will "pair-off" the purchase or
sale with a matching sale or purchase of the same security that settles prior
to, or on, the original settlement date. Profits or losses on the pair-off
transaction are settled by the Portfolio's paying or receiving the difference
between the purchase and sale prices from the counterparty in the transaction
(which will be a bank, broker-dealer or other financial institution determined
to be creditworthy by Northern).
A pair-off transaction that involves an initial sale by the Portfolio of a
security that it does not own (or does not have the right to obtain at no
added cost) will be considered a short sale of the security. Until the sale is
paired-off as described above, the Portfolio will maintain on a daily basis a
segregated account containing liquid assets at such a level that (a) the
amount deposited in the account will equal the current value of the security
sold short and (b) the amount deposited in the segregated account will not be
less than the market value of the security at the time it was sold short.
Similarly, a segregated account will be maintained for a pair-off transaction
that involves an initial purchase by the Portfolio of a security on a forward
commitment or when-issued basis as described more fully in the Additional
Statement.
The Portfolio will not enter into a pair-off transaction that involves either
a short sale or a forward commitment or when-issued purchase if, after effect
is given to the sale or purchase, the total market value of all open pair-off
transactions would exceed 25% of the value of the Portfolio's net assets.
Although pair-off transactions represent a strategy that will be used by
Northern in attempting to earn additional income for the Portfolio resulting
from short-term price movements in the securities markets, the transactions
may result in losses instead. In addition, pair-off transactions may produce
higher than normal portfolio turnover which may result in increased
transaction costs to the Portfolio and gains from the sale of securities
deemed to have been held for less than three months. Such gains must not
exceed 30% of the Portfolio's gross income in a taxable year in order for the
Portfolio to qualify as a regulated investment company under the Internal
Revenue Code of 1986.
FIXED INCOME INVESTMENTS. Even though interest-bearing securities are
investments which often offer a stable stream of income, the prices of fixed
income securities will vary inversely with changes in the prevailing level of
interest rates. These securities experience appreciation when interest rates
decline and depreciation when interest rates rise. An investment portfolio
consisting of fixed income securities will react in a similar manner.
Generally, the longer the maturity of a fixed income security, the higher its
yield and the greater its price volatility. Conversely, the shorter the
maturity, the lower the yield but the greater the price stability. The values
of fixed income securities also may be affected by changes in the credit
rating or financial condition of the issuing entities. A security's rating
normally depends on the likelihood that the borrower will meet each interest
and principal installment on a timely basis. As a result, lower-rated bonds
typically yield more than higher-rated
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bonds of the same maturity. Credit ratings evaluate the safety of principal
and interest payments, not market risk, and rating agencies may or may not
make timely changes in a rating to reflect economic or company conditions that
affect a security's market value. As a result, the ratings of rating services
are used by Northern only as indicators of investment quality. For a more
complete discussion of ratings, see Appendix A to the Additional Statement.
PORTFOLIO TURNOVER. The Trust cannot accurately predict the turnover rate for
the Portfolio, which may vary from year to year. It is expected that the
portfolio turnover rate for the Portfolio will not exceed 100% during the
current fiscal year. High portfolio turnover (in excess of 100%) may result in
the realization of short-term capital gains which are taxable to unitholders
as ordinary income (see "Taxes"). In addition, high portfolio turnover rates
may result in corresponding increases in brokerage commissions and other
transaction costs. The Portfolio will not consider portfolio turnover rate a
limiting factor in making investment decisions consistent with its objective
and policies.
MISCELLANEOUS. The Portfolio does not intend to purchase certificates of
deposit of Northern or its affiliate banks, commercial paper issued by
Northern's parent holding company or other securities issued or guaranteed by
Northern, its parent holding company or their subsidiaries or affiliates.
INVESTMENT RESTRICTIONS
The Portfolio is subject to certain investment restrictions which, as
described in more detail in the Additional Statement, are fundamental policies
that cannot be changed without the approval of a majority of the outstanding
units of the Portfolio. The Portfolio will limit its investments so that, with
respect to 75% of its total assets, not more than 5% will be invested in the
securities of any one issuer (other than investment company securities, U.S.
Government securities or repurchase agreements collateralized by U.S.
Government securities) and the Portfolio will not invest more than 25% of its
total assets in the securities (other than investment company securities, U.S.
Government securities and repurchase agreements collateralized by U.S.
Government securities) of issuers in any one industry. In addition, the
Portfolio may borrow money from banks for temporary or emergency purposes or
to meet redemption requests, provided that the Portfolio maintains asset
coverage of at least 300% for all such borrowings.
TRUST INFORMATION
BOARD OF TRUSTEES
The business and affairs of the Trust and the Portfolio are managed under the
direction of the Trust's Board of Trustees. The Additional Statement contains
the name of each Trustee and background information regarding the Trustees.
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern, which has offices at 50 S. LaSalle Street, Chicago, Illinois 60675,
serves as investment adviser, transfer agent and custodian for the Portfolio.
As transfer agent, Northern performs various administrative servicing
functions, and any unitholder inquiries should be directed to it.
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Northern, a member of the Federal Reserve System, is an Illinois state-
chartered commercial bank and the principal subsidiary of Northern Trust
Corporation, a bank holding company. Northern was formed in 1889 with
capitalization of $1 million. As of March 31, 1997, Northern Trust Corporation
and its subsidiaries had approximately $23.2 billion in assets, $15.2 billion
in deposits and employed over 6,900 persons.
Northern administered in various capacities (including as master trustee,
investment manager or custodian) approximately $815.9 billion of assets as of
March 31, 1997, including approximately $136.3 billion of assets for which
Northern had investment management responsibility.
Under its Advisory Agreement with the Trust, Northern, subject to the general
supervision of the Trust's Board of Trustees, is responsible for making
investment decisions for the Portfolio and placing purchase and sale orders
for portfolio securities. Northern is also responsible for monitoring and
preserving the records required to be maintained under the regulations of the
SEC (with certain exceptions unrelated to its activities for the Trust). As
compensation for its advisory services and its assumption of related expenses,
Northern is entitled to a fee, computed daily and payable monthly, at an
annual rate of .60% of the average daily net assets of the Portfolio. Northern
has voluntarily agreed to reduce its advisory fee for the Portfolio to .25% of
the Portfolio's average daily net assets for the current fiscal year. See
"Summary of Expenses" above.
PORTFOLIO MANAGER
The table below sets forth information on the person primarily responsible for
the day-to-day management of the Portfolio:
<TABLE>
<CAPTION>
YEARS PRIMARILY FIVE YEAR
NAME AND TITLE RESPONSIBLE EMPLOYMENT HISTORY
--------------------- --------------- ------------------
<S> <C> <C>
Steven Schafer Since 1997 Mr. Schafer joined Northern in 1988.
Second Vice President
</TABLE>
Northern also receives compensation as the Trust's custodian and transfer
agent under separate agreements. The fees payable by the Portfolio for these
services are described in this Prospectus under "Summary of Expenses" and in
the Additional Statement. Different transfer agency fees are payable with
respect to the Class A, B, C and D units in the Portfolio.
ADMINISTRATOR AND DISTRIBUTOR
Goldman Sachs, 85 Broad Street, New York, New York 10004, acts as
administrator and distributor for the Portfolio. As compensation for its
administrative services (which include supervision with respect to the Trust's
non-investment advisory operations) and the assumption of related expenses,
Goldman Sachs is entitled to a fee from the Portfolio, computed daily and
payable monthly, at an annual rate of .10% of the average daily net assets of
the Portfolio. No compensation is payable by the Trust to Goldman Sachs for
its distribution services. Goldman Sachs has agreed for the current fiscal
year that it will reimburse the Portfolio for all expenses (including the fees
payable to Goldman Sachs as administrator, but excluding the fees payable to
Northern for its duties as investment adviser and transfer agent, servicing
fees and extraordinary expenses, such as litigation, interest, taxes and
indemnification expenses) which exceed on an annualized basis .10% of the
Portfolio's average daily net assets. In addition, as stated under "Summary of
Expenses," Northern intends to voluntarily reduce its advisory fee for the
Portfolio during the Trust's current fiscal year. The result of these
reimbursements and fee reductions will be to increase the performance of the
Portfolio during the periods for which the reimbursements and reductions are
made.
18
<PAGE>
UNITHOLDER SERVICING PLAN
Pursuant to a Unitholder Servicing Plan ("Servicing Plan") adopted by the
Board of Trustees, the Trust may enter into agreements ("Servicing
Agreements") with banks, corporations, brokers, dealers and other financial
institutions which may include Northern and its affiliates ("Servicing
Agents"), under which they will render (or arrange for the rendering of)
administrative support services for investors who beneficially own Class B, C
and D units of the Portfolio. Beneficial owners of Class C and D units require
extensive administrative support services while beneficial owners of Class B
units need only some of these services. Administrative support services, which
are described more fully in the Additional Statement, may include processing
purchase and redemption requests from investors, placing net purchase and
redemption orders with Northern acting as the Trust's transfer agent,
providing necessary personnel and facilities to establish and maintain
investor accounts and records, and providing information periodically to
investors showing their positions in Portfolio units.
For these services, fees are payable by the Trust to Servicing Agents at an
annual rate of up to .10%, .15% and .25% of the average daily net asset value
of Class B units, Class C units and Class D units, respectively, held or
serviced by such Servicing Agents for beneficial unitholders ("Servicing
Fees"). Servicing Agents are required to provide investors with a schedule of
any credits, fees or other conditions that may be applicable to the investment
of their assets in Portfolio units.
Conflict of interest restrictions may apply to the receipt of compensation
paid by the Trust to a Servicing Agent in connection with the investment of
fiduciary funds in Portfolio units. Banks and other institutions regulated by
the Office of Comptroller of the Currency, Board of Governors of the Federal
Reserve System and state banking commissions, and investment advisers and
other money managers subject to the jurisdiction of the SEC, the Department of
Labor or state securities commissions, are urged to consult legal counsel
before entering into Servicing Agreements.
SERVICE INFORMATION
Class A units are designed to be purchased by institutional investors or
others who can obtain information about their unitholder accounts and who do
not require the Transfer Agent or Servicing Agent services that are provided
for Class B, C and D unitholders.
Class B units are designed to be purchased by organizations maintaining record
ownership on behalf of beneficial owners where certain services of the
Transfer Agent and a Servicing Agent are required that are incident to the
separation of record and beneficial ownership.
Class C units are designed to be purchased by institutional investors who
require certain account related services of the Transfer Agent and a Servicing
Agent that are incident to the investor being the beneficial owner of units.
Class D units are designed to be purchased by investors having a relationship
with an organization which requires that account related services and
information be provided to the investor and organization by the Transfer Agent
and a Servicing Agent.
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<PAGE>
Any person entitled to receive compensation for selling or servicing units of
the Portfolio may receive different compensation with respect to one
particular class of units over another in the Portfolio.
EXPENSES
Except as set forth above and in the Additional Statement under "Additional
Trust Information," the Portfolio is responsible for the payment of its
expenses. Such expenses include, without limitation, the fees and expenses
payable to Northern and Goldman Sachs, brokerage fees and commissions, fees
for the registration or qualification of Portfolio units under Federal or
state securities laws, expenses of the organization of the Portfolio, taxes,
interest, costs of liability insurance, fidelity bonds, indemnification or
contribution, any costs, expenses or losses arising out of any liability of,
or claim for damages or other relief asserted against, the Trust for violation
of any law, legal, tax and auditing fees and expenses, Servicing Fees,
expenses of preparing and printing prospectuses, statements of additional
information, proxy materials, reports and notices and the printing and
distributing of the same to the Trust's unitholders and regulatory
authorities, compensation and expenses of its Trustees, expenses of industry
organizations such as the Investment Company Institute, miscellaneous expenses
and extraordinary expenses incurred by the Trust.
INVESTING
PURCHASE OF UNITS
Units of the Portfolio are sold on a continuous basis by the Trust's
distributor, Goldman Sachs, to institutional investors that either maintain
certain qualified accounts at Northern or its affiliates or invest an
aggregate of at least $5 million in one or more investment portfolios of the
Trust. Goldman Sachs has established several procedures for purchasing
Portfolio units in order to accommodate different types of institutional
investors.
PURCHASE OF UNITS THROUGH QUALIFIED ACCOUNTS. Class A, B, C and D units of
the Portfolio are offered to Northern, its affiliates and other institutions
and organizations (the "Institutions") acting on behalf of their customers,
clients, employees and others (the "Customers") and for their own account.
Institutions may purchase units of the Portfolio through procedures
established in connection with the requirements of their qualified accounts or
through procedures set forth herein with respect to Institutions that invest
directly. Institutions should contact Northern or an affiliate for further
information regarding purchases through qualified accounts. There is no
minimum initial investment for Institutions that maintain qualified accounts
with Northern or its affiliates.
PURCHASE OF UNITS DIRECTLY FROM THE TRUST. An Institution that purchases units
directly may do so by means of one of the following procedures, provided that
it makes an aggregate minimum initial investment of $5 million in one or more
investment portfolios of the Trust:
PURCHASE BY MAIL. An Institution desiring to purchase units of the
Portfolio by mail should mail a check or Federal Reserve draft payable to
the Portfolio together with a completed and signed new account application
to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box 75943,
Chicago, Illinois 60675-5943. An application will be incomplete if it does
not include a corporate resolution with the corporate seal and secretary's
certification within the preceding 30 days, or other acceptable evidence of
authority. If an
20
<PAGE>
Institution desires to purchase the units of more than one investment
portfolio of the Trust, the Institution should send a separate check for
each portfolio. All checks must be payable in U.S. dollars and drawn on a
bank located in the United States. A $20 charge will be imposed if a check
does not clear. The Trust may delay transmittal of redemption proceeds for
units recently purchased by check until such time as it has assured itself
that good funds have been collected for the purchase of such units. This
may take up to fifteen (15) days. Cash and third party checks are not
acceptable for the purchase of Trust units.
PURCHASE BY TELEPHONE. An Institution desiring to purchase units of the
Portfolio by telephone should call Northern acting as the Trust's transfer
agent ("Transfer Agent") at 1-800-637-1380. Please be prepared to identify
the name of the Portfolio and the manner of payment. Please indicate
whether a new account is being established or an additional payment is
being made to an existing account. If an additional payment is being made
to an existing account, please provide the Institution's name and Portfolio
Account Number. Purchase orders are effected upon receipt by the Transfer
Agent of Federal funds or other immediately available funds in accordance
with the terms set forth below.
PURCHASE BY WIRE OR ACH TRANSFER. An Institution desiring to purchase units
of the Portfolio by wire or ACH Transfer should call the Transfer Agent at
1-800-637-1380 for instructions if it is not making an additional payment
to an existing account. An Institution that wishes to add to an existing
account should wire Federal funds or effect an ACH Transfer to:
The Northern Trust Company
Chicago, Illinois
ABA Routing No. 0710-00152
(Reference 10 Digit Portfolio Account Number)
(Reference Unitholder's Name)
For more information concerning requirements for the purchase of units,
call the Transfer Agent at 1-800-637-1380.
EFFECTIVE TIME OF PURCHASES. A purchase order for Portfolio units received by
the Transfer Agent by 3:00 p.m., Chicago time, on a Business Day (as defined
under "Miscellaneous") will be effected on that Business Day at the net asset
value determined on that day; provided that either: (a) the Transfer Agent
receives the purchase price in Federal funds or other immediately available
funds prior to 3:00 p.m., Chicago time, on the same Business Day such order is
received; or (b) payment is received on the next Business Day in the form of
Federal funds or other immediately available funds in a qualified account
maintained by an Institution with Northern or an affiliate. Orders received
after 3:00 p.m. will be effected at the next determined net asset value,
provided that payment is made as provided herein. If an Institution accepts a
purchase order from a Customer on a non-Business Day, the order will not be
executed until it is received and accepted by the Transfer Agent on a Business
Day in accordance with the foregoing procedures.
MISCELLANEOUS PURCHASE INFORMATION. Units are purchased without a sales charge
imposed by the Trust. The minimum initial investment is $5 million for
Institutions that invest directly in one or more investment portfolios of the
Trust. The Trust reserves the right to waive this minimum and to determine the
manner in which the minimum investment is satisfied. There is no minimum for
subsequent investments.
Institutions may impose different minimum investment and other requirements on
Customers purchasing units through them. Depending on the terms governing the
particular account, Institutions may impose account charges
21
<PAGE>
such as asset allocation fees, account maintenance fees, compensating balance
requirements or other charges based upon account transactions, assets or
income which will have the effect of reducing the net return on an investment
in the Portfolio. In addition, certain Institutions may enter into Servicing
Agreements with the Trust whereby they will perform (or arrange to have
performed) various administrative support services for Customers who are the
beneficial owners of Class B, C and D units and receive fees from the
Portfolio for such services; such fees will be borne exclusively by the
beneficial owners of Class B, C and D units, respectively. See "Trust
Information--Unitholder Servicing Plan." The level of administrative support
services, as well as transfer agency services, required by an Institution and
its Customers generally will determine whether they purchase units of Class A,
B, C or D. The exercise of voting rights and the delivery to Customers of
unitholder communications from the Trust will be governed by the Customers'
account agreements with the Institutions. Customers should read this
Prospectus in connection with any relevant agreement describing the services
provided by an Institution and any related requirements and charges, or
contact the Institution at which the Customer maintains its account for
further information.
Institutions that purchase units on behalf of Customers are responsible for
transmitting purchase orders to the Transfer Agent and delivering required
funds on a timely basis. An Institution will be responsible for all losses and
expenses of the Portfolio as a result of a check that does not clear, an ACH
transfer that is rejected, or any other failure to make payment in the time
and manner described above, and Northern may redeem units from an account it
maintains to protect the Portfolio and Northern against loss. The Trust
reserves the right to reject any purchase order. Federal regulations require
that the Transfer Agent be furnished with a taxpayer identification number
upon opening or reopening an account. Purchase orders without such a number or
an indication that a number has been applied for will not be accepted. If a
number has been applied for, the number must be provided and certified within
sixty days of the date of the order.
Payment for units of the Portfolio may, in the discretion of Northern, be made
in the form of securities that are permissible investments for the Portfolio.
For further information about the terms of such purchases, see the Additional
Statement.
In the interests of economy and convenience, certificates representing units
of the Portfolio are not issued.
Institutions investing in the Portfolio on behalf of their Customers should
note that state securities laws regarding the registration of dealers may
differ from the interpretations of Federal law and such Institutions may be
required to register as dealers pursuant to state law.
Northern may, at its own expense, provide compensation to certain dealers
whose customers purchase significant amounts of units of the Trust. The amount
of such compensation may be made on a one-time and/or periodic basis, and may
represent all or a portion of the annual fees that are earned by Northern as
investment adviser (after adjustments) and are attributable to units held by
such customers. Such compensation will not represent an additional expense to
the Trust or its unitholders, since it will be paid from assets of Northern or
its affiliates.
REDEMPTION OF UNITS
REDEMPTION OF UNITS THROUGH QUALIFIED ACCOUNTS. Institutions may redeem units
of a class through procedures established by Northern and its affiliates in
connection with the requirements of their qualified accounts. Institutions
should contact Northern or an affiliate for further information regarding
redemptions through qualified accounts.
22
<PAGE>
REDEMPTION OF UNITS DIRECTLY. Institutions that purchase units directly from
the Trust through the Transfer Agent may redeem all or part of their Portfolio
units in accordance with procedures set forth below.
REDEMPTION BY MAIL. An Institution may redeem units by sending a written
request to The Benchmark Funds, c/o The Northern Trust Company, P.O. Box
75943, Chicago, Illinois 60675-5943. Redemption requests must be signed by
a duly authorized person, and must state the number of units or the dollar
amount to be redeemed and identify the Portfolio Account Number. See "Other
Requirements."
REDEMPTION BY TELEPHONE. An Institution may redeem units by placing a
redemption order by telephone by calling the Transfer Agent at 1-800-637-
1380. During periods of unusual economic or market changes, telephone
redemptions may be difficult to implement. In such event, unitholders
should follow procedures outlined above under "Redemption by Mail."
REDEMPTION BY WIRE. If an Institution has given authorization for expedited
wire redemption, units can be redeemed and the proceeds sent by Federal
wire transfer to a single previously designated bank account. The minimum
amount which may be redeemed by this method is $10,000. The Trust reserves
the right to change or waive this minimum or to terminate the wire
redemption privilege. See "Other Requirements."
TELEPHONE PRIVILEGE. An Institution that has notified the Transfer Agent in
writing of the Institution's election to redeem or exchange units by
placing an order by telephone may do so by calling the Transfer Agent at
1-800-637-1380. Neither the Trust nor its Transfer Agent will be
responsible for the authenticity of instructions received by telephone that
are reasonably believed to be genuine. To the extent that the Trust fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it or its service providers may be liable for such
instructions that prove to be fraudulent or unauthorized. In all other
cases, the unitholder will bear the risk of loss for fraudulent telephone
transactions. However, the Transfer Agent has adopted procedures in an
effort to establish reasonable safeguards against fraudulent telephone
transactions. The proceeds of redemption orders received by telephone will
be sent by check, by wire or by transfer pursuant to proper instructions.
All checks will be made payable to the unitholder of record and mailed only
to the unitholder's address of record. See "Other Requirements."
Additionally, the Transfer Agent utilizes recorded lines for telephone
transactions and retains such tape recordings for six months, and will
request a form of identification if such identification has been furnished
to the Transfer Agent or the Trust.
OTHER REQUIREMENTS. A change of wiring instructions and a change of the
address of record may be effected only by a written request to the Transfer
Agent accompanied by (i) a corporate resolution which evidences authority
to sign on behalf of the Institution (including the corporate seal and
secretary's certification within the preceding 30 days), (ii) a signature
guarantee by a financial institution that is a participant in the Stock
Transfer Agency Medallion Program ("STAMP") in accordance with rules
promulgated by the SEC (a signature notarized by a notary public is not
acceptable) or (iii) such other evidence of authority as may be acceptable
to the Transfer Agent. A redemption request by mail will not be effective
unless signed by a person authorized by the corporate resolution or other
acceptable evidence of authority on file with the Transfer Agent.
EXCHANGE PRIVILEGE. Institutions and, to the extent permitted by their account
agreements, Customers, may, after appropriate prior authorization, exchange
Class A, B, C or D units of the Portfolio having a value of at least $1,000
for Class A, B, C or D units, respectively, of other equity and fixed income
portfolios of the Trust as to which the Institution or Customer maintains an
existing account with an identical title.
23
<PAGE>
Exchanges will be effected by a redemption of Class A, B, C or D units of the
investment portfolio held and the purchase of units of the investment
portfolio acquired. Customers of Institutions should contact their
Institutions for further information regarding the Trust's exchange privilege
and Institutions should contact the Transfer Agent as appropriate. The Trust
reserves the right to modify or terminate the exchange privilege at any time
upon 60 days' written notice to unitholders and to reject any exchange
request. Exchanges are only available in states where an exchange can legally
be made.
EFFECTIVE TIME OF REDEMPTIONS AND EXCHANGES. Redemption orders of Portfolio
units are effected at the net asset value per unit next determined after
receipt in good order by the Transfer Agent. Good order means that the request
includes the following: the account number and Portfolio name; the amount of
the transaction (as specified in dollars or units); and the signature of a
duly authorized person (except for telephone and wire redemptions). See
"Investing--Redemption of Units--Other Requirements." Exchange orders are
effected at the net asset value per unit (plus any additional transaction fee
payable in connection with the purchase of units in certain portfolios of the
Trust) next determined after receipt in good order by the Transfer Agent. If
received by Northern with respect to a qualified account it maintains or the
Transfer Agent by 3:00 p.m., Chicago time, on a Business Day, a redemption
request normally will result in proceeds being credited to such account or
sent on the next Business Day. Proceeds for redemption orders received on a
non-Business Day will normally be sent on the second Business Day after
receipt in good order.
MISCELLANEOUS REDEMPTION INFORMATION. All redemption proceeds will be sent by
check unless Northern or the Transfer Agent is directed otherwise. The ACH
system may be utilized for payment of redemption proceeds. Redemption of units
may not be effected if a unitholder has failed to submit a completed and
properly executed (with corporate resolution or other acceptable evidence of
authority) new account application. If units to be redeemed were recently
purchased by check, the Trust may delay transmittal of redemption proceeds
until such time as it has assured itself that good funds have been collected
for the purchase of such units. This may take up to fifteen (15) days. The
Trust reserves the right to defer crediting, sending or wiring redemption
proceeds for up to seven days after receiving the redemption order if, in its
judgment, an earlier payment could adversely affect the Portfolio.
The Trust may require any information reasonably necessary to ensure that a
redemption has been duly authorized.
It is the responsibility of Institutions acting on behalf of Customers to
transmit redemption orders to the Transfer Agent and to credit Customers'
accounts with the redemption proceeds on a timely basis. If a Customer has
agreed with a particular Institution to maintain a minimum balance in his
account at such Institution and the balance in such account falls below that
minimum, such Customer may be obliged to redeem all or part of his units to
the extent necessary to maintain the required minimum balance.
DISTRIBUTIONS
Distributions from the Portfolio's net investment income and annualized
capital gains are made as follows:
<TABLE>
<CAPTION>
INVESTMENT INCOME
DIVIDENDS CAPITAL
------------------ GAINS
DECLARED PAID DISTRIBUTION
------------------ ------------
<S> <C> <C> <C>
Monthly Monthly Annually
</TABLE>
24
<PAGE>
Dividends and distributions will reduce the Portfolio's net asset value by the
amount of the dividend or distribution. All dividends and distributions are
automatically reinvested (without any sales charge) in additional units of the
Portfolio at the net asset value per unit determined on the payment date.
However, a holder may elect, upon written notification to the Transfer Agent,
to have dividends or capital gain distributions (or both) paid in cash or
reinvested in the same class of units of another investment portfolio of the
Trust at their net asset value per unit (plus any additional transaction fee
payable in connection with the purchase of units in certain portfolios of the
Trust) determined on the payment date (provided the holder maintains an
account in such portfolio). Unitholders of record must make such election, or
any revocation thereof, in writing to the Transfer Agent. The election will
become effective with respect to dividends paid two days after its receipt by
the Transfer Agent.
Because of the different servicing fees and transfer agency fees payable with
respect to the Class A, B, C and D units in the Portfolio, the amount of the
Portfolio's net investment income available for distribution to the holders of
such units will be effectively reduced by the amount of such fees. See
"Unitholder Service Plan" and "Investment Adviser, Transfer Agent and
Custodian" under the heading "Trust Information" in this Prospectus.
TAXES
The Portfolio intends to qualify as a "regulated investment company" under the
Internal Revenue Code of 1986, as amended (the "Code"). Such qualification
generally will relieve the Portfolio of liability for Federal income taxes to
the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a taxable
year requires, among other things, that the Portfolio distribute to its
unitholders an amount equal to at least 90% of its investment company taxable
income for such year. In general, the Portfolio's investment company taxable
income will be its taxable income, subject to certain adjustments and
excluding the excess of any net long-term capital gain for the taxable year
over the net short-term capital loss, if any, for such year. The Portfolio
intends to distribute as dividends substantially all of its investment company
taxable income each year. Such dividends will be taxable as ordinary income to
the Portfolio's unitholders who are not currently exempt from Federal income
taxes whether they are received in cash or reinvested in additional units.
(Federal income taxes for distributions to an IRA or other qualified
retirement plan are deferred under the Code.) It is not expected that the
Portfolio's distributions will qualify for the dividends received deduction
for corporations.
Substantially all of the Portfolio's net realized long-term capital gains will
be distributed at least annually to its unitholders. The Portfolio generally
will have no tax liability with respect to such gains and the distributions
will be taxable to Portfolio unitholders who are not currently exempt from
Federal income taxes as long-term capital gains, regardless of how long the
unitholders have held the units and whether such gains are received in cash or
reinvested in additional units. Unitholders should note that, upon sale or
exchange of Portfolio units, if the unitholder has not held such units for
more than six months, any loss on the sale or exchange of those units will be
treated as long term capital loss to the extent of the capital gain dividends
received with respect to the units.
Dividends declared in October, November or December of any year payable to
unitholders of record on a specified date in such months will be deemed for
Federal tax purposes to have been paid by the Portfolio and received by the
unitholders on December 31 of such year if such dividends are paid during
January of the following year.
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<PAGE>
An investor considering buying units of the Portfolio on or just before the
record date of a dividend should be aware that the amount of the forthcoming
dividend payment, although in effect a return of capital, will be taxable.
A taxable gain or loss may be realized by a unitholder upon the redemption,
transfer or exchange of units of the Portfolio depending upon the tax basis
and their price at the time of redemption, transfer or exchange.
Unitholders of record will be advised by the Trust at least annually as to the
Federal income tax consequences of distributions made to them each year.
The foregoing discussion summarizes some of the important Federal tax
considerations generally affecting the Portfolio and its unitholders and is
not intended as a substitute for careful tax planning. Accordingly, potential
investors in the Portfolio should consult their tax advisers with specific
reference to their own Federal, state and local tax situation.
NET ASSET VALUE
The net asset value per unit of the Portfolio for purposes of pricing purchase
and redemption orders is calculated by Northern as of 3:00 p.m., Chicago Time,
on each Business Day. Net asset value per unit of a particular class in the
Portfolio is calculated by dividing the value of all securities and other
assets belonging to the Portfolio that are allocated to such class, less the
liabilities charged to that class, by the number of the outstanding units of
that class.
U.S. and foreign investments held by the Portfolio are valued at the last
quoted sales price on the exchange on which such securities are primarily
traded, except that securities listed on an exchange in the United Kingdom are
valued at the average of the closing bid and ask prices. If any securities
listed on a U.S. securities exchange are not traded on a valuation date, they
will be valued at the last quoted bid price. If securities listed on a foreign
securities exchange are not traded on a valuation date, they will be valued at
the most recent quoted trade price. Securities which are traded in the U.S.
over-the-counter markets are valued at the last quoted bid price. Securities
which are traded in the foreign over-the-counter markets are valued at the
last sales price, except that such securities traded in the United Kingdom are
valued at the average of the closing bid and ask prices. Any securities,
including restricted securities, for which current quotations are not readily
available are valued at fair value as determined in good faith by Northern
under the supervision of the Board of Trustees. Short-term investments are
valued at amortized cost which Northern has determined, pursuant to Board
authorization, approximates market value. Securities may be valued on the
basis of prices provided by independent pricing services when such prices are
believed to reflect the fair market value of such securities.
PERFORMANCE INFORMATION
The performance of a class of units of the Portfolio may be compared to those
of other mutual funds with similar investment objectives and to bond and other
relevant indices or to rankings prepared by independent services or other
financial or industry publications that monitor the performance of mutual
funds. For example, the performance of a class of units may be compared to
data prepared by Lipper Analytical Services, Inc. or other
26
<PAGE>
independent mutual fund reporting services. In addition, the performance of a
class may be compared to the Lehman Brothers Government/Corporate Bond Index
(or its two components, the Treasury Bond Index and the Agency Bond Index),
the Lehman Brothers Intermediate/Corporate Bond Index, the Consumer Price
Index or other unmanaged bond indices, including, but not limited to, the
Merrill Lynch 1-5 Year Government Bond Index, the Merrill Lynch 1-5 Year
Corporate/Government Bond Index, the J.P. Morgan Non-U.S. Government Bond
Index. Performance data as reported in national financial publications such as
Money Magazine, Morningstar, Forbes, Barron's, The Wall Street Journal and The
New York Times, or in publications of a local or regional nature, may also be
used in comparing the performance of a class of units of the Portfolio.
The Portfolio will calculate its total return for each class of units on an
"average annual total return" basis for various periods from the date the
Portfolio commences investment operations and for other periods as permitted
under the rules of the SEC. Average annual total return reflects the average
annual percentage change in value of an investment in the class over the
measuring period. Total returns for each class of units may also be calculated
on an "aggregate total return" basis for various periods. Aggregate total
return reflects the total percentage change in value over the measuring
period. Both methods of calculating total return reflect changes in the price
of the units and assume that any dividends and capital gain distributions made
by the Portfolio with respect to a class during the period are reinvested in
the units of that class. When considering average total return figures for
periods longer than one year, it is important to note that the annual total
return of a class for any one year in the period might have been more or less
than the average for the entire period. The Portfolio may also advertise from
time to time the total return of one or more classes of units on a year-by-
year or other basis for various specified periods by means of quotations,
charts, graphs or schedules.
The yield of a class of units in the Portfolio is computed based on the net
income of such class during a 30-day (or one month) period (which period will
be identified in connection with the particular yield quotation). More
specifically, the Portfolio's yield for a class of units is computed by
dividing the per unit net income for the class during a 30-day (or one month)
period by the net asset value per unit on the last day of the period and
annualizing the result on a semi-annual basis.
Because of the different servicing fees and transfer agency fees payable with
respect to the Class A, B, C and D units in the Portfolio, the performance of
such units will be effectively reduced by the amount of such fees. For
example, because Class A units bear the lowest servicing and transfer agency
fees, the return of Class A units will be more than the return of other
classes of units of the Portfolio. See "Unitholder Servicing Plan" and
"Investment Adviser, Transfer Agent and Custodian" under the heading "Trust
Information" in this Prospectus.
The performance of each class of units of the Portfolio is based on historical
earnings, will fluctuate and is not intended to indicate future performance.
The investment return and principal value of an investment in a class will
fluctuate so that, when redeemed, units may be worth more or less than their
original cost. Performance data may not provide a basis for comparison with
bank deposits and other investments which provide a fixed yield for a stated
period of time. Total return data should also be considered in light of the
risks associated with the Portfolio's composition, quality, maturity,
operating expenses and market conditions. Any fees charged by Institutions
directly to their Customer accounts in connection with investments in the
Portfolio will not be included in calculations of performance data.
27
<PAGE>
ORGANIZATION
The Trust was formed as a Massachusetts business trust on July 15, 1982 under
an Agreement and Declaration of Trust (the "Trust Agreement"). The Trust
Agreement permits the Board of Trustees to issue an unlimited number of units
of beneficial interest of one or more separate series representing interests
in one or more investment portfolios. As of the date of this Prospectus, the
Trust offers eighteen separate series of units of beneficial interest
representing interests in eighteen investment portfolios, one of which is
described in this Prospectus; the other series of units are described in
separate prospectuses. It is anticipated that each investment series of the
Trust, including the Intermediate Bond Portfolio, will be reorganized on
[September 30], 1997, or as soon thereafter as practicable, into newly
established series of a Delaware business trust (the "Delaware Trust"). The
current Trustees of the Trust will also serve as Trustees of the Delaware
Trust and the investment objectives, restrictions and policies and expenses of
the series of the Delaware Trust will be identical to those of the
corresponding portfolios of the Trust. The initial unitholder of the
Intermediate Bond Portfolio has approved the reorganization of the Portfolio
into a series of the Delaware Trust. In the event that the unitholders of the
other series of the Trust do not approve reorganizations into the Delaware
Trust, the Intermediate Bond Portfolio may not be reorganized into the
Delaware Trust. The Trustees of the Trust are responsible for the overall
management and supervision of its affairs. The Declaration of Trust of both
the Trust and the Delaware Trust authorizes the Board of Trustees to classify
or reclassify any unissued units into additional series or subseries within a
series. Pursuant to such authority, the Board of Trustees has classified four
subseries (sometimes referred to as "Classes") of units in the Portfolio: the
Class A units, Class B units, Class C units and Class D units. Each unit of
the Portfolio is without par value, represents an equal proportionate interest
in the Portfolio with each other unit of its class in the Portfolio and is
entitled to such dividends and distributions earned on the Portfolio's assets
as are declared in the discretion of the Board of Trustees.
The Trust's unitholders are entitled to one vote for each full unit held and
proportionate fractional votes for fractional units held. Each series entitled
to vote on a matter will vote thereon in the aggregate and not by series,
except as otherwise required by law or when the matter to be voted on affects
only the interests of unitholders of a particular series. The Additional
Statement gives examples of situations in which the law requires voting by
series. Voting rights are not cumulative and, accordingly, the holders of more
than 50% of the aggregate units of the Trust may elect all of the Trustees
irrespective of the vote of the other unitholders. In addition, holders of
each of the Class A, B, C and D units representing interests in the Portfolio
have equal voting rights except that only units of a particular class within
the Portfolio will be entitled to vote on matters submitted to a vote of
unitholders (if any) relating to unitholder servicing expenses and transfer
agency fees that are payable by that class.
As of July 15, 1997, Northern possessed sole or shared voting or investment
power for its customer accounts with respect to more than 50% of the
outstanding units of the Trust.
The Trust does not presently intend to hold annual meetings of unitholders
except as required by the 1940 Act or other applicable law. Pursuant to the
Trust Agreement, the Trustees will promptly call a meeting of unitholders to
vote upon the removal of any Trustee when so requested in writing by the
record holders of 10% or more of the outstanding units. To the extent required
by law, the Trust will assist in unitholder communications in connection with
such a meeting.
28
<PAGE>
The Trust Agreement provides that each unitholder, by virtue of becoming such,
will be held to have expressly assented and agreed to the terms of the Trust
Agreement and to have become a party thereto.
MISCELLANEOUS
The address of the Trust is 4900 Sears Tower, Chicago, Illinois 60606 and the
telephone number is (800) 621-2550.
As used in this Prospectus, the term "Business Day" refers to each day when
Northern and the New York Stock Exchange are open, which is Monday through
Friday, except for holidays observed by Northern and/or the Exchange. For 1997
the holidays of Northern and/or the Exchange are: New Year's Day, Martin
Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving and Christmas Day.
On those days when Northern or the Exchange closes early as a result of
unusual weather or other circumstances, the right is reserved to advance the
time on that day by which purchase and redemption requests must be received.
In addition, on any Business Day when the Public Securities Association (PSA)
recommends that the securities markets close early, the Portfolio reserves
the right to cease or to advance the deadline for accepting purchase and
redemption orders for same Business Day credit up to one hour before the PSA
recommended closing time. Purchase and redemption requests received after the
advanced closing time will be effected on the next Business Day.
---------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, OR IN THE TRUST'S STATEMENT
OF ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH
THE OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST OR ITS DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY
THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT LAWFULLY BE MADE.
29
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities have been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
SUBJECT TO COMPLETION -- MAY 16, 1997
PART B
STATEMENT OF ADDITIONAL INFORMATION
THE BENCHMARK FUNDS
4900 SEARS TOWER
CHICAGO, ILLINOIS 60606
SHORT DURATION PORTFOLIO
U.S. GOVERNMENT SECURITIES PORTFOLIO
SHORT-INTERMEDIATE BOND PORTFOLIO
U.S. TREASURY INDEX PORTFOLIO
BOND PORTFOLIO
INTERMEDIATE BOND PORTFOLIO
INTERNATIONAL BOND PORTFOLIO
This Statement of Additional Information (the "Additional Statement") dated
________, 1997 is not a prospectus. This Additional Statement should be read in
conjunction with the Prospectus for the Short Duration, U.S. Government
Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond, Intermediate
Bond and International Bond Portfolios (the "Portfolios") of The Benchmark Funds
(the "Prospectus") dated _________, 1997. Copies of the Prospectus may be
obtained without charge by calling Goldman, Sachs & Co. ("Goldman Sachs") toll-
free at 1-800-621-2550 (outside Illinois) or by writing to the address stated
above. Capitalized terms not otherwise defined have the same meaning as in the
Prospectus.
-----------------------
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
ADDITIONAL INVESTMENT INFORMATION B-3
Investment Objectives and Policies B-3
Investment Restrictions Applicable to the
Short Duration Portfolio B-18
Investment Restrictions Applicable to the
U.S. Government Securities, Short-Intermediate
Bond, U.S. Treasury Index, Bond, Intermediate
Bond and International Bond Portfolios B-21
ADDITIONAL TRUST INFORMATION B-24
Trustees and Officers B-24
Investment Adviser, Transfer Agent and Custodian B-29
Administrator and Distributor B-38
Unitholder Servicing Plan B-40
Counsel and Auditors B-43
In-Kind Purchases B-43
</TABLE>
B-1
<PAGE>
<TABLE>
<S> <C>
PERFORMANCE INFORMATION B-44
TAXES B-52
General B-52
Taxation of Certain Financial Instruments B-54
Foreign Investors B-56
Conclusion B-57
DESCRIPTION OF UNITS B-57
OTHER INFORMATION B-62
FINANCIAL STATEMENTS B-63
APPENDIX A (Description of Bond Ratings) 1-A
APPENDIX B (Futures Contracts) 1-B
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS ADDITIONAL STATEMENT OR IN THE PROSPECTUS
IN CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. THE PROSPECTUS DOES NOT CONSTITUTE
AN OFFERING BY THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
UNITS OF THE TRUST ARE NOT BANK DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED,
ENDORSED OR OTHERWISE SUPPORTED BY, THE NORTHERN TRUST COMPANY, ITS PARENT
COMPANY OR ITS AFFILIATES, AND ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE
U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER GOVERNMENTAL AGENCY. INVESTMENT IN THE PORTFOLIOS INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL.
B-2
<PAGE>
ADDITIONAL INVESTMENT INFORMATION
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the investment objectives and policies of the Short
Duration, U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury
Index, Bond, Intermediate Bond and International Bond Portfolios of The
Benchmark Funds (the "Trust") as set forth in the Prospectus.
U.S. Government Obligations. Examples of other types of U.S. Government
- ---------------------------
obligations that may be acquired by the Portfolios include U.S. Treasury Bills,
Treasury Notes and Treasury Bonds and the obligations of Federal Home Loan
Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal Housing
Administration, Farmers Home Administration, Export-Import Bank of the United
States, Small Business Administration, General Services Administration, Student
Loan Marketing Association, Central Bank for Cooperatives, Federal Home Loan
Mortgage Corporation, Federal Intermediate Credit Banks, and the Maritime
Administration.
Supranational Bank Obligations. Each Portfolio (other than the U.S. Treasury
- ------------------------------
Index Portfolio) may invest in obligations of supranational banks.
Supranational banks are international banking institutions designed or supported
by national governments to promote economic reconstruction, development or trade
between nations (e.g., the World Bank). Obligations of supranational banks may
be supported by appropriated but unpaid commitments of their member countries
and there is no assurance that these commitments will be undertaken or met in
the future.
Stripped Securities. The Treasury Department has facilitated transfers of
- -------------------
ownership of zero coupon securities by accounting separately for the beneficial
ownership of particular interest coupon and principal payments on Treasury
securities through the Federal Reserve book-entry record-keeping system. The
Federal Reserve program as established by the Treasury Department is known as
"STRIPS" or "Separate Trading of Registered Interest and Principal of
Securities." Each Portfolio may purchase securities registered in the STRIPS
program. Under the STRIPS program, a Portfolio will be able to have its
beneficial ownership of zero coupon securities recorded directly in the book-
entry record-keeping system in lieu of having to hold certificates or other
evidences of ownership of the underlying U.S. Treasury securities.
In addition, each Portfolio (other than the U.S. Treasury Index Portfolio) may
acquire U.S. Government obligations and their unmatured interest coupons that
have been separated ("stripped") by their holder, typically a custodian bank or
investment brokerage firm. Having separated the interest coupons from the
B-3
<PAGE>
underlying principal of the U.S. Government obligations, the holder will resell
the stripped securities in custodial receipt programs with a number of different
names, including "Treasury Income Growth Receipts" ("TIGRs") and "Certificate of
Accrual on Treasury Securities" ("CATS"). The stripped coupons are sold
separately from the underlying principal, which is usually sold at a deep
discount because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic interest
(cash) payments. The underlying U.S. Treasury bonds and notes themselves are
held in book-entry form at the Federal Reserve Bank or, in the case of bearer
securities (i.e., unregistered securities which are ostensibly owned by the
bearer or holder), in trust on behalf of the owners. Counsel to the
underwriters of these certificates or other evidences of ownership of U.S.
Treasury securities have stated that, in their opinion, purchasers of the
stripped securities most likely will be deemed the beneficial holders of the
underlying U.S. Government obligations for Federal tax purposes. The Trust is
not aware of any binding legislative, judicial or administrative authority on
this issue.
To the extent consistent with its investment objectives, each Portfolio may
purchase stripped mortgage-backed securities ("SMBS"). SMBS are usually
structured with two or more classes that receive different proportions of the
interest and principal distributions from a pool of mortgage-backed obligations.
A common type of SMBS will have one class receiving all of the interest, while
the other class receives all of the principal. However, in some instances, one
class will receive some of the interest and most of the principal while the
other class will receive most of the interest and the remainder of the
principal. If the underlying obligations experience greater than anticipated
prepayments of principal, the Portfolio may fail to fully recoup its initial
investment in these securities. The market value of the class consisting
entirely of principal payments generally is extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on other
mortgage-backed obligations because their cash flow patterns are also volatile
and there is a risk that the initial investment will not be fully recouped.
SMBS issued by the U.S. Government (or a U.S. Government agency or
instrumentality) may be considered liquid under guidelines established by the
Trust's Board of Trustees if they can be disposed of promptly in the ordinary
course of business at a value reasonably close to that used in the calculation
of the net asset value per unit.
Asset-Backed Securities. The U.S. Government Securities Portfolio may purchase
- -----------------------
securities that are secured or backed by mortgages and issued by an agency of
the U.S. Government, and the Short Duration, Short-Intermediate Bond, Bond,
Intermediate Bond and International Bond Portfolios may purchase asset-backed
B-4
<PAGE>
securities, which are securities backed by mortgages, installment contracts,
credit card receivables or other assets. Asset-backed securities represent
interests in "pools" of assets in which payments of both interest and principal
on the securities are made monthly, thus in effect "passing through" monthly
payments made by the individual borrowers on the assets that underlie the
securities, net of any fees paid to the issuer or guarantor of the securities.
The average life of asset-backed securities varies with the maturities of the
underlying instruments, and the average life of a mortgage-backed instrument, in
particular, is likely to be substantially less than the original maturity of the
mortgage pools underlying the securities as a result of mortgage prepayments.
For this and other reasons, an asset-backed security's stated maturity may be
shortened, and the security's total return may be difficult to predict
precisely. Asset-backed securities acquired by a Portfolio may include
collateralized mortgage obligations ("CMOs") issued by private companies.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities
guaranteed by the Government National Mortgage Association ("GNMA") include GNMA
Mortgage Pass-Through Certificates (also known as "Ginnie Maes") which are
guaranteed as to the timely payment of principal and interest by GNMA and such
guarantee is backed by the full faith and credit of the United States. GNMA is
a wholly-owned U.S. Government corporation within the Department of Housing and
Urban Development. GNMA certificates also are supported by the authority of
GNMA to borrow funds from the U.S. Treasury to make payments under its
guarantee. Mortgage-backed securities issued by the Federal National Mortgage
Association ("FNMA") include FNMA Guaranteed Mortgage Pass-Through Certificates
(also known as "Fannie Maes") which are solely the obligations of the FNMA and
are not backed by or entitled to the full faith and credit of the United States,
but are supported by the right of the issuer to borrow from the U.S. Treasury.
FNMA is a government-sponsored organization owned entirely by private
stockholders. Fannie Maes are guaranteed as to timely payment of the principal
and interest by FNMA. Mortgage-related securities issued by the Federal Home
Loan Mortgage Corporation ("FHLMC") include FHLMC Mortgage Participation
Certificates (also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of Congress,
which is owned entirely by Federal Home Loan Banks. Freddie Macs are not
guaranteed by the United States or by any Federal Home Loan Banks and do not
constitute a debt or obligation of the United States or of any Federal Home Loan
Bank. Freddie Macs entitle the holder to timely payment of interest, which is
guaranteed by the FHLMC. FHLMC guarantees either ultimate collection or timely
payment of all principal payments on the underlying mortgage loans. When FHLMC
does not guarantee timely payment of
B-5
<PAGE>
principal, FHLMC may remit the amount due on account of its guarantee of
ultimate payment of principal at any time after default on an underlying
mortgage, but in no event later than one year after it becomes payable.
Non-mortgage asset-backed securities involve certain risks that are not
presented by mortgage-backed securities. Primarily, these securities do not
have the benefit of the same security interest in the underlying collateral.
Credit card receivables are generally unsecured and the debtors are entitled to
the protection of a number of state and federal consumer credit laws, many of
which have given debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. Most issuers of automobile receivables
permit the servicers to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have an
effective security interest in all of the obligations backing such receivables.
Therefore, there is a possibility that recoveries on repossessed collateral may
not, in some cases, be able to support payments on these securities.
Foreign Securities. Unanticipated political or social developments may affect
- ------------------
the value of a Portfolio's investments in emerging market countries and the
availability to the Portfolio of additional investments in those countries. The
small size and inexperience of the securities markets in certain of such
countries and the limited volume of trading in securities in those countries may
make the Portfolio's investments in such countries illiquid and more volatile
than investments in Japan or most Western European countries, and the Portfolio
may be required to establish special custodial or other arrangements before
making certain investments in those countries. There may be little financial or
accounting information available with respect to issuers located in certain of
such countries, and it may be difficult as a result to assess the value or
prospects of an investment in such issuers.
Investors should understand that the expense ratio of the International Bond
Portfolio can be expected to be higher than those of funds investing in domestic
securities. The costs attributable to investing abroad are usually higher for
several reasons, such as the higher cost of investment research, higher cost of
custody of foreign securities, higher commissions paid on comparable
transactions on foreign markets and additional costs arising from delays in
settlements of transactions involving foreign securities.
B-6
<PAGE>
Foreign Currency Transactions. In order to protect against a possible loss on
- -----------------------------
investments resulting from a decline or appreciation in the value of a
particular foreign currency against the U.S. dollar or another foreign currency
or for other reasons, the Short-Intermediate Bond, Bond, Intermediate Bond and
International Bond Portfolios are authorized to enter into forward currency
exchange contracts. These contracts involve an obligation to purchase or sell a
specified currency at a future date at a price set at the time of the contract.
Forward currency contracts do not eliminate fluctuations in the values of
portfolio securities but rather allow a Portfolio to establish a rate of
exchange for a future point in time.
When entering into a contract for the purchase or sale of a security, a
Portfolio may enter into a forward foreign currency exchange contract for the
amount of the purchase or sale price to protect against variations, between the
date the security is purchased or sold and the date on which payment is made or
received, in the value of the foreign currency relative to the U.S. dollar or
other foreign currency.
When Northern anticipates that a particular foreign currency may decline
substantially relative to the U.S. dollar or other leading currencies, in order
to reduce risk, a Portfolio may enter into a forward contract to sell, for a
fixed amount, the amount of foreign currency approximating the value of some or
all of the Portfolio's securities denominated in such foreign currency.
Similarly, when the obligations held by a Portfolio create a short position in a
foreign currency, the Portfolio may enter into a forward contract to buy, for a
fixed amount, an amount of foreign currency approximating the short position.
With respect to any forward foreign currency contract, it will not generally be
possible to match precisely the amount covered by that contract and the value of
the securities involved due to the changes in the values of such securities
resulting from market movements between the date the forward contract is entered
into and the date it matures. In addition, while forward contracts may offer
protection from losses resulting from declines or appreciation in the value of a
particular foreign currency, they also limit potential gains which might result
from changes in the value of such currency. A Portfolio may also incur costs in
connection with forward foreign currency exchange contracts and conversions of
foreign currencies and U.S. dollars.
In addition, with respect to the International Bond Portfolio, Northern may
purchase or sell forward foreign currency exchange contracts to seek to increase
total return.
A separate account consisting of liquid assets equal to the amount of a
Portfolio's assets that could be required to consummate forward contracts will
be established with the
B-7
<PAGE>
Portfolios' custodian except to the extent the contracts are otherwise
"covered." For the purpose of determining the adequacy of the securities in the
account, the deposited securities will be valued at market or fair value. If
the market or fair value of such securities declines, additional liquid
securities will be placed in the account daily so that the value of the account
will equal the amount of such commitments by the Portfolio. A forward contract
to sell a foreign currency is "covered" if a Portfolio owns the currency (or
securities denominated in the currency) underlying the contract, or holds a
forward contract (or call option) permitting the Portfolio to buy the same
currency at a price that is (i) no higher than the Portfolio's price to sell the
currency or (ii) greater than the Portfolio's price to sell the currency
provided the difference is maintained by the Portfolio in liquid assets in a
segregated account with its custodian. A forward contract to buy a foreign
currency is "covered" if a Portfolio holds a forward contract (or call option)
permitting the Portfolio to sell the same currency at a price that is (i) as
high as or higher than the Portfolio's price to buy the currency or (ii) lower
than the Portfolio's price to buy the currency provided the difference in
maintained by the Portfolio in liquid assets in a segregated account with its
custodian.
Interest Rate Swaps, Floors and Caps and Currency Swaps. The Portfolios (other
- -------------------------------------------------------
than the U.S. Treasury Index Portfolio) may enter into interest rate swaps,
floors and caps for hedging purposes and not for speculation. Interest rate
swaps involve the exchange by a Portfolio with another party of their respective
commitments to pay or receive interest, such as an exchange of fixed rate
payments for floating rate payments. A Portfolio will typically use interest
rate swaps to preserve a return on a particular investment or portion of its
portfolio or to shorten the effective duration of its portfolio investments. The
purchase of an interest rate floor or cap entitles the purchaser to receive
payments of interest on a notional principal amount from the seller, to the
extent the specified index falls below (floor) or exceeds (cap) a predetermined
interest rate. The Portfolios will only enter into interest rate swaps or
interest rate floor or cap transactions on a net basis, i.e. the two payment
streams are netted out, with a Portfolio receiving or paying, as the case may
be, only the net amount of the two payments.
The International Bond Portfolio may enter into currency swaps, which involve
the exchange of the rights of the Portfolio and another party to make or receive
payments in specified currencies. Currency swaps usually involve the delivery
of the entire principal value of one designated currency in exchange for the
other designated currency.
B-8
<PAGE>
Inasmuch as interest rate and currency swaps are entered into for good faith
hedging purposes, the Trust and Northern believe that such transactions do not
constitute senior securities as defined in the 1940 Act and, accordingly, will
not treat them as being subject to the Portfolio's borrowing restrictions. The
net amount of the excess, if any, of a Portfolio's obligations over its
entitlements with respect to interest rate or currency swaps will be accrued on
a daily basis and an amount of liquid assets having an aggregate net asset value
at least equal to such accrued excess will be maintained in a segregated account
by the Portfolio's custodian.
The Portfolios will not enter into an interest rate or currency swap or interest
rate floor or cap transaction unless the unsecured commercial paper, senior debt
or the claims-paying ability of the other party thereto is rated either A or A-1
or better by S&P, Duff or Fitch, or A or P-1 or better by Moody's. If there is
a default by the other party to such transaction, the Portfolios will have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid in comparison with markets for other similar instruments which
are traded in the interbank market.
Options. Each Portfolio may buy put options and call options and write covered
- -------
call and secured put options. Such options may relate to particular securities,
financial instruments, foreign currencies, foreign or domestic securities
indices or (in the case of the International Bond Portfolio) the yield
differential between two securities ("yield curve options") and may or may not
be listed on a domestic or foreign securities exchange (an "Exchange") or issued
by the Options Clearing Corporation. Options trading is a highly specialized
activity which entails greater than ordinary investment risk. Options on
particular securities may be more volatile than the underlying instruments and,
therefore, on a percentage basis, an investment in options may be subject to
greater fluctuation than an investment in the underlying instruments themselves.
The Portfolios will write call options only if they are "covered." In the case
of a call option on a security or currency, the option is "covered" if a
Portfolio owns the security or currency underlying the call or has an absolute
and immediate right to acquire that security or currency without additional cash
consideration (or, if additional cash consideration is required, liquid assets
in such amount are held in a segregated account by its custodian) upon
conversion or exchange of other securities or instruments held by it. For a
call option on an index, the option is covered if a Portfolio
B-9
<PAGE>
maintains with its custodian, a portfolio of securities substantially
replicating the movement of the index, or liquid assets equal to the contract
value. A call option is also covered if a Portfolio holds a call on the same
security, currency or index as the call written where the exercise price of the
call held is (i) equal to or less than the exercise price of the call written,
or (ii) greater than the exercise price of the call written provided the
difference is maintained by the Portfolio in liquid assets in a segregated
account with its custodian. The Portfolios will write put options only if they
are "secured" by liquid assets maintained in a segregated account by the
Portfolios' custodian in an amount not less than the exercise price of the
option at all times during the option period.
With respect to yield curve options, a call (or put) option is covered if the
International Bond Portfolio holds another call (or put) option on the spread
between the same two securities and maintains in a segregated account with its
custodian liquid assets sufficient to cover the Portfolio's net liability under
the two options. Therefore, the Portfolio's liability for such a covered option
is generally limited to the difference between the amount of the Portfolio's
liability under the option written by the Portfolio less the value of the option
held by the Portfolio. Yield curve options may also be covered in such other
manner as may be in accordance with the requirements of the counterparty with
which the option is traded and applicable laws and regulations. Yield curve
options are traded over-the-counter, and because they have been only recently
introduced, established trading markets for these securities have not yet
developed.
A Portfolio's obligation to sell a security or currency subject to a covered
call option written by it, or to purchase a security or currency subject to a
secured put option written by it, may be terminated prior to the expiration date
of the option by the Portfolio's execution of a closing purchase transaction,
which is effected by purchasing on an exchange an option of the same series
(i.e., same underlying security or currency, exercise price and expiration date)
as the option previously written. Such a purchase does not result in the
ownership of an option. A closing purchase transaction will ordinarily be
effected to realize a profit on an outstanding option, to prevent an underlying
security or currency from being called, to permit the sale of the underlying
security or currency or to permit the writing of a new option containing
different terms on such underlying security. The cost of such a liquidation
purchase plus transaction costs may be greater than the premium received upon
the original option, in which event the Portfolio will have incurred a loss in
the transaction. There is no assurance that a liquid secondary market will
exist for any particular option. An option writer, unable to effect a closing
purchase transaction, will not be able to sell the underlying security or
currency (in
B-10
<PAGE>
the case of a covered call option) or liquidate the segregated account (in the
case of a secured put option) until the option expires or the optioned security
or currency is delivered upon exercise with the result that the writer in such
circumstances will be subject to the risk of market decline or appreciation in
the security or currency during such period.
When a Portfolio purchases an option, the premium paid by it is recorded as an
asset of the Portfolio. When the Portfolio writes an option, an amount equal to
the net premium (the premium less the commission) received by the Portfolio is
included in the liability section of the Portfolio's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the current bid price. If an option
purchased by the Portfolio expires unexercised the Portfolio realizes a loss
equal to the premium paid. If the Portfolio enters into a closing sale
transaction on an option purchased by it, the Portfolio will realize a gain if
the premium received by the Portfolio on the closing transaction is more than
the premium paid to purchase the option, or a loss if it is less. If an option
written by the Portfolio expires on the stipulated expiration date or if the
Portfolio enters into a closing purchase transaction, it will realize a gain (or
loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option written by the Portfolio is exercised, the
proceeds of the sale will be increased by the net premium originally received
and the Portfolio will realize a gain or loss.
There are several risks associated with transactions in certain options. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. In addition, a
liquid secondary market for particular options, whether traded over-the-counter
or on an Exchange may be absent for reasons which include the following: there
may be insufficient trading interest in certain options; restrictions may be
imposed by an Exchange on opening transactions or closing transactions or both;
trading halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities or currencies;
unusual or unforeseen circumstances may interrupt normal operations on an
Exchange; the facilities of an Exchange or the Options Clearing Corporation may
not at all times be adequate to handle current trading value; or one or more
Exchanges could, for economic or other reasons, decide or be compelled at some
future date to discontinue the trading of options (or a particular class or
series of options), in which
B-11
<PAGE>
event the secondary market on that Exchange (or in that class or series of
options) would cease to exist, although outstanding options that had been issued
by the Options Clearing Corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
Futures Contracts and Related Options. Each Portfolio may invest in futures
- -------------------------------------
contracts and interest rate futures contracts and may purchase and sell call and
put options on futures contracts for hedging purposes, for speculative purposes
(to seek to increase total return), or for liquidity management purposes. For a
detailed description of futures contracts and related options, see Appendix B to
this Additional Statement.
Securities Lending. Collateral for loans of portfolio securities made by a
- ------------------
Portfolio may consist of cash, securities issued or guaranteed by the U.S.
Government or its agencies or irrevocable bank letters of credit (or any
combination thereof). The borrower of securities will be required to maintain
the market value of the collateral at not less than the market value of the
loaned securities, and such value will be monitored on a daily basis. When a
Portfolio lends its securities, it continues to receive dividends and/or
interest on the securities loaned and may simultaneously earn interest on the
investment of the cash collateral which will be invested in readily marketable,
high quality, short-term obligations. Although voting rights, or rights to
consent, attendant to securities on loan pass to the borrower, such loans will
be called so that the securities may be voted by a Portfolio if a material event
affecting the investment is to occur.
Forward Commitments, When-Issued Securities and Delayed Delivery Transactions.
- -----------------------------------------------------------------------------
When a Portfolio purchases securities on a when-issued, delayed delivery or
forward commitment basis, the Portfolio's custodian (or subcustodian) will
maintain in a segregated account liquid assets having a value (determined daily)
at least equal to the amount of the Portfolio's purchase commitments. In the
case of a forward commitment to sell portfolio securities, the custodian or
subcustodian will hold the portfolio securities themselves in a segregated
account while the commitment is outstanding. These procedures are designed to
ensure that the Portfolio will maintain sufficient assets at all times to cover
its obligations under when-issued purchases, forward commitments and delayed
delivery transactions.
As described in the Prospectus, the Short Duration, U.S. Government Securities,
Short-Intermediate Bond, Bond and Intermediate Bond Portfolios may dispose of or
negotiate a when-issued or forward commitment after entering into it in
connection with pair-off transactions. A Portfolio will normally realize a
capital gain or loss in connection with these transactions. For purposes of
determining a Portfolio's average dollar-weighted
B-12
<PAGE>
maturity, the maturity of when-issued or forward commitment securities will be
calculated from the commitment date.
Commercial Paper, Bankers' Acceptances, Certificates of Deposit, Time Deposits
- ------------------------------------------------------------------------------
and Bank Notes. Commercial paper represents short-term unsecured promissory
- --------------
notes issued in bearer form by banks or bank holding companies, corporations and
finance companies. Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite period of time and
earning a specified return. Bankers' acceptances are negotiable drafts or bills
of exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties that
vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party. Bank notes rank
junior to deposit liabilities of banks and pari passu with other senior,
----------
unsecured obligations of the bank. Some states have "depositor preference" laws
that give depositors of their state chartered banks priority over holders of
bank notes and other general creditors. In addition, the U.S. Congress has
adopted legislation which creates a Federal "depositor preference" law providing
the claims of certain creditors of an insured depository institution (including
its depositors) with priority over the claims of that institution's unsecured
creditors (including holders of its notes), in the event of that institution's
insolvency or other resolution. Bank notes are classified as "other borrowings"
on a bank's balance sheet, while deposit notes and certificates of deposit are
classified as deposits. Bank notes are not insured by the Federal Deposit
Insurance Corporation or any other insurer. Deposit notes are insured by the
Federal Deposit Insurance Corporation to the extent of $100,000 per depositor.
A Portfolio may invest a portion of its assets in the obligations of foreign
banks and foreign branches of domestic banks. Such obligations include
Eurodollar Certificates of Deposit ("ECDs") which are U.S. dollar-denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States; Eurodollar Time Deposits ("ETDs") which are U.S.
dollar-denominated deposits in a foreign branch of a U.S. bank or a foreign
bank; Canadian Time Deposits ("CTDs") which are essentially the same as ETDs
except they are issued by Canadian offices of major Canadian banks; Schedule Bs,
which are obligations issued by Canadian branches of foreign or domestic banks;
Yankee Certificates of Deposit ("Yankee CDs") which are U.S. dollar-denominated
certificates of deposit issued by a U.S.
B-13
<PAGE>
branch of a foreign bank and held in the United States; and Yankee Bankers'
Acceptances ("Yankee BAs") which are U.S. dollar-denominated bankers'
acceptances issued by a U.S. branch of a foreign bank and held in the United
States.
Variable and Floating Rate Instruments. With respect to the variable and
- --------------------------------------
floating rate instruments that may be acquired by the Portfolios, Northern will
consider the earning power, cash flows and other liquidity ratios of the issuers
and guarantors of such instruments and, if the instruments are subject to demand
features, will continuously monitor their financial status and ability to meet
payment on demand. Where necessary to ensure that a variable or floating rate
instrument meets the Portfolios' quality requirements, the issuer's obligation
to pay the principal of the instrument will be backed by an unconditional bank
letter or line of credit, guarantee or commitment to lend.
Pair-Off Transactions. Subject to the requirements of the 1940 Act, each
- ---------------------
Portfolio (other than the U.S. Treasury Index and International Bond Portfolios)
may engage in pair-off transactions involving securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities. In a pair-off
transaction Northern will commit to purchase or sell a security. Then, prior to
the settlement date, Northern will "pair-off" the purchase or sale with a
matching sale or purchase of the same security that settles prior to, or on, the
original settlement date. Profits or losses on the pair-off transaction are
settled by a Portfolio's paying or receiving the difference between the purchase
and sale prices from the counterparty in the transaction (which will be a bank,
broker-dealer or other financial institution determined to be creditworthy by
Northern).
A pair-off transaction that involves an initial sale by a Portfolio of a
security that it does not own (or does not have the right to obtain at no added
cost) will be considered a short sale of the security. Until the sale is paired-
off as described above, the Portfolio will maintain on a daily basis a
segregated account containing liquid assets at such a level that (a) the amount
deposited in the segregated account will equal the current value of the security
sold short and (b) the amount deposited in the segregated account will not be
less than the market value of the security at the time it was sold short.
Similarly, a segregated account will be maintained for a pair-off transaction
that involves an initial purchase by a Portfolio of a security on a forward
commitment or when-issued basis as described more fully in this Additional
Statement.
A Portfolio will not enter into a pair-off transaction that involves either a
short sale or a forward commitment or when-issued purchase if, after effect is
given to the sale or purchase,the total market value of all open pair-off
transactions would exceed 25% of the value of the Portfolio's net assets.
B-14
<PAGE>
Although pair-off transactions represent a strategy that may be used by
Northern in attempting to earn additional income for the Portfolios resulting
form short-term price movements in the securities markets, the transactions may
result in losses instead. In addition, pair-off transactions may produce higher
than normal portfolio turnover which may result in increased transaction costs
to a Portfolio and gains from the sale of securities deemed to have been held
for less than three months. Such gains must not exceed 30% of a Portfolio's
gross income in a taxable year in order for the Portfolio to qualify as a
regulated investment company under the Internal Revenue Code of 1986.
Investment Companies. To the extent required by the 1940 Act and the
- --------------------
regulations and orders of the SEC thereunder, each Portfolio currently intends
to limit its investments in securities issued by other investment companies so
that, as determined immediately after a purchase of such securities is made, not
more than 3% of the total outstanding stock of any one investment company will
be owned by a Portfolio, the Trust as a whole and their affiliated persons (as
defined in the 1940 Act). An investment company whose securities are purchased
by a Portfolio or the Trust is not obligated to redeem such securities in an
amount exceeding 1% of the investment company's total outstanding securities
during any period of less than 30 days. Therefore, such securities that exceed
this amount may be illiquid. Notwithstanding the foregoing, a Portfolio may
adhere to more restrictive limitations with respect to its investments in
securities issued by other investment companies if required by the SEC or deemed
to be in the best interests of the Trust and will comply with any fundamental
investment restriction that may otherwise be applicable to such investments. To
the extent required by the 1940 Act, each Portfolio expects to vote the shares
of other investment companies that are held by it in the same proportion as the
vote of all other holders of such securities.
Repurchase Agreements. Each Portfolio may enter into repurchase agreements with
- ---------------------
financial institutions, such as banks and broker-dealers, as are deemed
creditworthy by Northern under guidelines approved by the Trust's Board of
Trustees. The repurchase price under the repurchase agreements will generally
equal the price paid by a Portfolio plus interest negotiated on the basis of
current short-term rates (which may be more or less than the rate on the
securities underlying the repurchase agreement). Securities subject to
repurchase agreements will be held by the Trust's custodian (or subcustodian),
in the Federal Reserve/Treasury book-entry system or by another authorized
securities depository. Repurchase agreements are considered to be loans by a
Portfolio under the 1940 Act.
Reverse Repurchase Agreements. Each Portfolio may borrow funds for temporary or
- -----------------------------
emergency purposes by selling portfolio securities to financial institutions
such as banks and
B-15
<PAGE>
broker/dealers and agreeing to repurchase them at a mutually specified date and
price ("reverse repurchase agreements"). Reverse repurchase agreements involve
the risk that the market value of the securities sold by a Portfolio may decline
below the repurchase price. The Portfolios will pay interest on amounts
obtained pursuant to a reverse repurchase agreement. While reverse repurchase
agreements are outstanding, a Portfolio will maintain in a segregated account
liquid assets in an amount at least equal to the market value of the securities,
plus accrued interest, subject to the agreement. Reverse repurchase agreements
are considered to be borrowings by a Portfolio under the 1940 Act.
Risks Related to Lower-Rated Securities. While any investment carries some
- ---------------------------------------
risk, certain risks associated with lower-rated securities are different than
those for investment-grade securities. The risk of loss through default is
greater because lower-rated securities are usually unsecured and are often
subordinate to an issuer's other obligations. Additionally, the issuers of
these securities frequently have high debt levels and are thus more sensitive to
difficult economic conditions, individual corporate developments and rising
interest rates. Consequently, the market price of these securities may be quite
volatile and may result in wider fluctuations of a Portfolio's net asset value
per unit.
There remains some uncertainty about the performance level of the market for
lower-rated securities under adverse market and economic environments. An
economic downturn or increase in interest rates could have a negative impact on
both the markets for lower-rated securities (resulting in a greater number of
bond defaults) and the value of lower-rated securities held in a portfolio of
investments.
The economy and interest rates can affect lower-rated securities differently
than other securities. For example, the prices of lower-rated securities are
more sensitive to adverse economic changes or individual corporate developments
than are the prices of higher-rated investments. In addition, during an
economic downturn or period in which interest rates are rising significantly,
highly leveraged issuers may experience financial difficulties, which, in turn,
would adversely affect their ability to service their principal and interest
payment obligations, meet projected business goals and obtain additional
financing.
If an issuer of a security defaults, a Portfolio may incur additional expenses
to seek recovery. In addition, periods of economic uncertainty would likely
result in increased volatility for the market prices of lower-rated securities
as well as a Portfolio's net asset value. In general, both the prices and
yields of lower-rated securities will fluctuate.
B-16
<PAGE>
In certain circumstances it may be difficult to determine a security's fair
value due to a lack of reliable objective information. Such instances occur
where there is not an established secondary market for the security or the
security is lightly traded. As a result, a Portfolio's valuation of a security
and the price it is actually able to obtain when it sells the security could
differ.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of lower-rated securities held by
a Portfolio, especially in a thinly traded market. Illiquid or restricted
securities held by the Portfolio may involve special registration
responsibilities, liabilities and costs, and could involve other liquidity and
valuation difficulties.
The rating assigned by a rating agency evaluates the safety of a lower-rated
security's principal and interest payments, but does not address market value
risk. Because the ratings of the rating agencies may not always reflect current
conditions and events, in addition to using recognized rating agencies and other
sources, Northern performs its own analysis of the issuers whose lower-rated
securities the Portfolios hold. Because of this, the Portfolios' performance
may depend more on Northern's own credit analysis than in the case of mutual
funds investing in higher-rated securities.
In selecting lower-rated securities, Northern considers factors such as those
relating to the creditworthiness of issuers, the ratings and performance of the
securities, the protections afforded the securities and the diversity of a
Portfolio's investment portfolio. Northern monitors the issuers of lower-rated
securities held by a Portfolio for their ability to make required principal and
interest payments, as well as in an effort to control the liquidity of the
Portfolio so that it can meet redemption requests.
Dollar-Weighted Average Maturity (Short Duration Portfolio only). Because the
- ----------------------------------------------------------------
Short Duration Portfolio's duration takes into account the cash flows from the
securities held by the Portfolio, the Portfolio's duration will never be longer
than its dollar-weighted average maturity. As stated, for purposes of
calculating the Portfolio's dollar-weighted average maturity, the maturity of a
security will normally be the date when final payment is due, with these
exceptions: (a) variable and floating rate instruments without demand features
may be deemed to have a maturity equal to the period remaining until the next
readjustment of the interest rate, (b) floating rate instruments which
incorporate a demand feature may be deemed to have a maturity equal to the
period remaining until the principal amount can be recovered through demand, (c)
variable rate instruments which incorporate a demand feature may be deemed to
have a
B-17
<PAGE>
maturity equal to the shorter of the period remaining until (i) the next
readjustment of the interest rate or (ii) the principal amount can be recovered
through demand, and (d) a repurchase agreement may be deemed to have a maturity
equal to the period remaining until the date on which the repurchase agreement
is to be repaid (whether at maturity or on demand). These exceptions do not
apply to certain variable and floating rate instruments, such as inverse
floating rate instruments. A fixed-rate mortgage-backed or other asset-backed
security will be deemed to have a maturity equal to the security's weighted
average life (i.e., the average time to receipt of expected cash flows on the
security).
Yields and Ratings. The yields on certain obligations, including the
- ------------------
instruments in which the Portfolios may invest, are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, financial condition of the issuer, size of the
offering, maturity of the obligation and ratings of the issue. The ratings of
S&P, Moody's, Duff, Fitch and TBW represent their respective opinions as to the
quality of the obligations they undertake to rate. Ratings, however, are
general and are not absolute standards of quality. Consequently, obligations
with the same rating, maturity and interest rate may have different market
prices.
Subject to the limitations stated in the Prospectus, if a Portfolio security
undergoes a rating revision, a Portfolio may continue to hold the security if
Northern determines that retention is warranted.
Calculation of Portfolio Turnover Rate. The portfolio turnover rate for the
- --------------------------------------
Portfolios is calculated by dividing the lesser of purchases or sales of
portfolio investments for the reporting period by the monthly average value of
the portfolio investments owned during the reporting period. The calculation
excludes all securities, including options, whose maturities or expiration dates
at the time of acquisition are one year or less. Portfolio turnover may vary
greatly from year to year as well as within a particular year, and may be
affected by cash requirements for redemption of units and by requirements which
enable the Portfolios to receive favorable tax treatment.
INVESTMENT RESTRICTIONS APPLICABLE TO THE SHORT DURATION PORTFOLIO
The Short Duration Portfolio is subject to the fundamental investment
restrictions enumerated below which may be changed with respect to the Short
Duration Portfolio only by a vote of the holders of a majority of the Short
Duration Portfolio's outstanding units.
The Portfolio may not:
B-18
<PAGE>
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent
the Portfolio from investing directly or indirectly in portfolio instruments
secured by real estate or interests therein.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that the Portfolio
may, to the extent appropriate to its investment policies, purchase securities
of companies engaging in whole or in part in such activities, and enter into
futures contracts and related options.
(5) Invest in companies for the purpose of exercising control or
management.
(6) Act as underwriter of securities, except as the Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
purchase and sale of portfolio instruments in accordance with its investment
objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions in
options on securities, financial instruments, currencies and indices of
securities; futures contracts; options on futures contracts; forward currency
contracts; short sales of securities against the box; interest rate swaps,
floors, caps and related options; and pair-off transactions.
(8) Purchase the securities of any issuer if such purchase would cause more
than 10% of the voting securities of such issuer to be held by the Portfolio,
except that up to 25% of the value of its total assets may be invested without
regard to this 10% limitation.
(9) Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
if immediately after such purchase more than 5% of the value of the Portfolio's
total assets would be invested in such issuer, except that: (a) up to 25% of
the value of the total assets of the Portfolio may be invested in any securities
without regard to this 5% limitation; and (b) such 5% limitation shall not apply
to repurchase agreements
B-19
<PAGE>
collateralized by obligations of the U.S. Government, its agencies or
instrumentalities.
(10) Purchase securities if such purchase would cause more than 25% in the
aggregate of the market value of the total assets of the Portfolio to be
invested in the securities of one or more issuers having their principal
business activities in the same industry, provided that there is no limitation
with respect to, and the Portfolio reserves freedom of action, when otherwise
consistent with its investment policies, to concentrate its investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, and repurchase agreements and securities loans collateralized
by such U.S. Government obligations. For the purposes of this restriction,
state and municipal governments and their agencies and authorities are not
deemed to be industries; as to utility companies, the gas, electric, water and
telephone businesses are considered separate industries; personal credit finance
companies and business credit finance companies are deemed to be separate
industries; and wholly-owned finance companies are considered to be in the
industries of their parents if their activities are primarily related to
financing the activities of their parents.
(11) Borrow money (other than pursuant to reverse repurchase agreements)
except (a) as a temporary measure, and then only in amounts not exceeding 5% of
the value of the Portfolio's total assets or (b) from banks, provided that
immediately after any such borrowing all borrowings of the Portfolio do not
exceed one-third of the Portfolio's total assets. No purchases of securities
will be made if borrowings subject to this restriction exceed 5% of the value of
the Portfolio's assets. The exception in (a) and (b) to this restriction are
not for investment leverage purposes but are solely for extraordinary or
emergency purposes or to facilitate management of the Portfolio by enabling it
to meet redemption requests when the liquidation of portfolio instruments is
deemed to be disadvantageous or not possible. If due to market fluctuations or
other reasons the total assets of the Portfolio fall below 300% of its
borrowings, the Trust will promptly reduce the borrowings of the Portfolio in
accordance with the 1940 Act.
In applying Restriction No. 9 above, a security is considered to be issued by
the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by the Portfolio, does not exceed 10% of the value of the Portfolio's
total assets.
In addition, as matter of fundamental policy, the Portfolio may not enter into
reverse repurchase agreements exceeding in the aggregate one-third of the
Portfolio's total assets.
B-20
<PAGE>
Except to the extent otherwise provided in Investment Restriction (10) for the
purpose of such restriction, in determining industry classification the Trust
intends to use the industry classification titles in the Standard Industrial
Classification Manual. Securities held in escrow or separate accounts in
connection with the Portfolio's investment practices described in this
Additional Statement and in the Prospectus are not deemed to be mortgaged,
pledged or hypothecated for purposes of the foregoing Investment Restrictions.
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, the Portfolio.
INVESTMENT RESTRICTIONS APPLICABLE TO THE U.S. GOVERNMENT SECURITIES, SHORT-
INTERMEDIATE BOND, U.S. TREASURY INDEX, BOND, INTERMEDIATE BOND AND
INTERNATIONAL BOND PORTFOLIOS
The U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury Index,
Bond, Intermediate Bond and International Bond Portfolios are subject to the
fundamental investment restrictions enumerated below which may be changed with
respect to these particular Portfolios only by a vote of the holders of a
majority of a Portfolio's outstanding units.
No Portfolio may:
(1) Make loans, except (a) through the purchase of debt obligations in
accordance with the Portfolio's investment objective and policies, (b) through
repurchase agreements with banks, brokers, dealers and other financial
institutions, and (c) loans of securities.
(2) Mortgage, pledge or hypothecate any assets (other than pursuant to
reverse repurchase agreements) except to secure permitted borrowings.
(3) Purchase or sell real estate, but this restriction shall not prevent a
Portfolio from investing directly or indirectly in portfolio instruments secured
by real estate or interests therein or acquiring securities of real estate
investment trusts or other issuers that deal in real estate.
(4) Purchase or sell commodities or commodity contracts or oil or gas or
other mineral exploration or development programs, except that each Portfolio
may, to the extent appropriate to its investment policies, purchase securities
of companies engaging in whole or in part in such activities, enter into futures
contracts and related options, and enter into forward currency contracts in
accordance with its investment objective and policies.
B-21
<PAGE>
(5) Invest in companies for the purpose of exercising control.
(6) Act as underwriter of securities, except as a Portfolio may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
purchase and sale of portfolio instruments in accordance with its investment
objective and portfolio management policies.
(7) Write puts, calls or combinations thereof, except for transactions in
options on securities, financial instruments, currencies and indices of
securities (and in the case of the International Bond Portfolio, yield curve
options); futures contracts; options on futures contracts; forward currency
contracts; short sales of securities against the box; interest rate swaps (and
in the case of the International Bond Portfolio, currency swaps); and pair-off
transactions (except in the case of the International Bond Portfolio).
(8) Purchase the securities of any issuer if such purchase would cause more
than 10% of the voting securities of such issuer to be held by the Portfolio,
except that up to 25% of the value of its total assets may be invested without
regard to this 10% limitation; provided that this restriction does not apply to
the International Bond Portfolio or Intermediate Bond Portfolio.
(9) Purchase securities (other than obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if such purchase would cause
more than 25% in the aggregate of the market value of the total assets of a
Portfolio to be invested in the securities of one or more issuers having their
principal business activities in the same industry. For the purposes of this
restriction, as to utility companies, the gas, electric, water and telephone
businesses are considered separate industries; personal credit finance companies
and business credit finance companies are deemed to be separate industries; and
wholly-owned finance companies are considered to be in the industries of their
parents if their activities are primarily related to financing the activities of
their parents.
(10) Borrow money (other than pursuant to reverse repurchase agreements),
except (a) as a temporary measure, and then only in amounts not exceeding 5% of
the value of the Portfolio's total assets or (b) from banks, provided that
immediately after any such borrowing all borrowings of the Portfolio do not
exceed one-third of the Portfolio's total assets. No purchases of securities
will be made if borrowings subject to this restriction exceed 5% of the value of
the Portfolio's assets. The exceptions in (a) and (b) to this restriction are
not for investment leverage purposes but are
B-22
<PAGE>
solely for extraordinary or emergency purposes or to facilitate management of
the Portfolios by enabling the Trust to meet redemption requests when the
liquidation of Portfolio instruments is deemed to be disadvantageous or not
possible. If due to market fluctuations or other reasons the total assets of a
Portfolio fall below 300% of its borrowings, the Trust will promptly reduce the
borrowings of such Portfolio in accordance with the 1940 Act.
IN ADDITION, THE U.S. GOVERNMENT SECURITIES, SHORT-INTERMEDIATE BOND, U.S.
TREASURY INDEX AND BOND PORTFOLIOS MAY NOT:
(11) Purchase the securities of any one issuer, other than obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities
if immediately after such purchase more than 5% of the value of such Portfolio's
total assets would be invested in such issuer, except that: (a) up to 25% of the
value of the total assets of each Portfolio may be invested in any securities
without regard to this 5% limitation; and (b) with respect to each Portfolio,
such 5% limitation shall not apply to repurchase agreements collateralized by
obligations of the U.S. Government, its agencies or instrumentalities.
In applying Restriction No. 11 above, a security is considered to be issued by
the entity, or entities, whose assets and revenues back the security. A
guarantee of a security is not deemed to be a security issued by the guarantor
when the value of all securities issued and guaranteed by the guarantor, and
owned by the Portfolio, does not exceed 10% of the value of the Portfolio's
total assets.
In addition, with respect to the Intermediate Bond Portfolio,
(12) The Portfolio may not make any investment inconsistent with the
Portfolio's classification as a diversified investment company under the
Investment Company Act of 1940, as amended.
(13) Notwithstanding any of the aforementioned fundamental investment
restrictions (including, without limitation, those restrictions relating to
issuer diversification, industry concentration and control), the Intermediate
Bond Portfolio may: (a) purchase securities of other investment companies to the
full extent permitted under Section 12 of the 1940 Act (or any successor
provision); and (b) invest all or substantially all of its assets in a single
open-end investment company or series thereof with substantially the same
investment objectives, restrictions and policies as the Portfolio.
Except to the extent otherwise provided in Investment Restriction (9) for the
purpose of such restriction, in determining industry classification the Trust
intends to use the industry classification titles in the Standard Industrial
Classification Manual (except that the International Bond Portfolio will use the
Morgan Stanley Capital International industry classification titles).
Securities held in escrow or separate accounts in
B-23
<PAGE>
connection with a Portfolio's investment practices described in this Additional
Statement and in the Prospectus are not deemed to be mortgaged, pledged or
hypothecated for purposes of the foregoing Investment Restrictions.
In addition, as a matter of fundamental policy, the International Bond Portfolio
will not issue senior securities except as stated in the Prospectus or this
Additional Statement.
As a non-fundamental investment restriction, the International Bond Portfolio
may not, at the end of any tax quarter, hold more than 10% of the outstanding
voting securities of any one issuer, except that up to 50% of the total value of
the assets of the Portfolio may be invested in any securities without regard to
this 10% limitation so long as no more than 25% of the total value of its assets
is invested in the securities of any one issuer (except the U.S. Government).
As a non-fundamental investment restriction that can be changed without
unitholder approval, the International Bond Portfolio may not, at the end of any
tax quarter, invest more than 5% of the total value of its assets in the
securities of any one issuer (except U.S. Government securities), except that up
to 50% of the total value of the Portfolio's assets may be invested in any
securities without regard to this 5% limitation so long as no more than 25% of
the total value of its assets is invested in the securities of any one issuer
(except U.S. Government securities).
Any restriction which involves a maximum percentage will not be considered
violated unless an excess over the percentage occurs immediately after, and is
caused by, an acquisition or encumbrance of securities or assets of, or
borrowings by, a Portfolio.
ADDITIONAL TRUST INFORMATION
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is set forth
below.
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- --------------------------------- --------------------------------- -------------------------------
<S> <C> <C>
William H. Springer, 67 Chairman Vice Chairman of Ameritech
701 Morningside Drive and (a telecommunications holding
Lake Forest, IL 60045 Trustee company), February 1987 to re-
tirement in August 1992; Vice
Chairman, Chief Financial and
Administrative Officer of
Ameritech prior to 1987; Di-
rector, Walgreen Co. (a retail
drug store business); and
Director of Baker, Fentress &
</TABLE>
B-24
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- --------------------------------- --------------------------------- -------------------------------
<S> <C> <C>
Co. (a closed-end, non-diversified
management investment company) from April
1992 to present.
Edward J. Condon, Jr., 56 Trustee Chairman of The Pardigm Group,
227 West Monroe Street Ltd. (a financial advisor)
Chicago, IL 60606. since July 1993; Vice President and
Treasurer of Sears, Roebuck and Co. (a
retail corporation) from February 1989 to
July 1993; within the last five years he
has served as a Director of: Sears Roebuck
Acceptance Corp.; Discover Credit Corp.;
Sears Receivables Financing Group, Inc.;
Sears Credit Corp.; and Sears Overseas
Finance N.V.
John W. English, 64 Trustee Private Investor; Vice Pres-
50-H New England Avenue ident and Chief Investment
P.O. Box 640 Officer of The Ford Foundation
Summit, NJ 07902-0640. (a charitable trust) from 1981 until 1993;
Trustee: The China Fund, Inc.; Paribas
Trust for the Institutions; Retail Property
Trust; Sierra Trust; American Red Cross in
Greater New York; Mote Marine Laboratory;
and United Board for Christian Higher
Education in Asia. Director: University of
Iowa Foundation; Blanton-Peale Institutes of
Religion and Health; Community Found-ation
of Sarasota County; Duke Management Company;
and John Ringling Centre Foundation.
James J. Gavin, Jr., 74 Trustee Vice Chairman from January
161 Thorntree Lane 1985 to August 1987 and Senior
Winnetka, Illinois 60093 Vice President-Finance and Chief Financial
Officer from 1975 to January 1985 of Borg-
Warner Corporation (a diversi-
fied manufacturing company also engaged in
providing financial and protective ser-
</TABLE>
B-25
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- --------------------------------- --------------------------------- -------------------------------
<S> <C> <C>
vices); Director of Service Corporation
International (a funeral service/cemetery
company); Stepan Corporation
(a producer of basic and in termediate
chemicals); Borg-Warner Industrial Products,
Inc. (a supplier of advanced technology
fluid transfer and control equipment,
systems and services).
Frederick T. Kelsey, 69 Trustee Consultant to Goldman Sachs
3133 Laughing Gull Court from December 1985 through
Johns Island, SC 29455 February 1988; Director of Goldman Sachs
Funds Group and Vice President of Goldman
Sachs from May 1981 until his retirement in
November 1985; President and Treasurer of
the Trust through August 1985; Trustee,
various management investment companies
affiliat ed with Kemper Financial Com
panies.
Richard P. Strubel, 57 Trustee President and Chief Executive
70 West Madison St Officer, Tandem Partners,
Suite 1400 Inc. (a diversified
Chicago, IL 60602 manufacturer of fastening systems and
connectors)since January 1984.
Paul Klug, 45 President Vice President of Goldman
One New York Plaza Sachs; Director of Proprietary
New York, NY 10004 Mutual Funds of GSAM since
February 1994; Chief Operating
Officer, Vista Capital Manage
ment, Chase Manhattan Bank
from January 1990 to February
1994.
Pauline Taylor, 50 Vice Vice President of Goldman
4900 Sears Tower President Sachs; Co-Manager, Shareholder
Chicago, IL 60606 Services of GSAM Funds Group
since June 1992; Consultant
since 1989; Senior Vice Pres-
ident of Fidelity Investments
prior to 1989.
</TABLE>
B-26
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- --------------------------------- --------------------------------- -------------------------------
<S> <C> <C>
Nancy L. Mucker, 47 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL 60606 Services for GSAM Funds Group
since November 1989.
John W. Mosior, 58 Vice Vice President, Goldman Sachs
4900 Sears Tower President and Manager of Shareholder
Chicago, IL 60606 Services for GSAM Funds Group
since November 1989.
Scott M. Gilman, 37 Treasurer Director, Mutual Funds Admin-
One New York Plaza istration, Goldman Sachs Asset
New York, NY 10004 Management since April 1994;
Assistant Treasurer, Goldman
Sachs Funds Management, Inc.
since March 1993; Vice Pre
sident, Goldman Sachs since
March 1990.
John Perlowski, 32 Assistant Vice President, Goldman Sachs
One New York Plaza Treasurer since July 1995; Director,
New York, NY 10004 Investors Bank and Trust,
November 1993 to July 1995;
Audit Manager of Arthur Ander-
son LLP prior thereto.
Michael J. Richman, 36 Secretary Associate General Counsel,
85 Broad Street Goldman Sachs Asset Management
New York, NY 10004 since February 1994; Vice
President and Assistant General Counsel of Goldman Sachs
since June 1992; Counsel to
the Funds Group, GSAM since
June 1992; Partner, Hale and
Dorr from September 1991 to
June 1992.
Howard B. Surloff, 31 Assistant Vice President and Assistant
85 Broad Street Secretary General Counsel, Goldman Sachs
New York, NY 10004 since November 1993 and May
1994, respectively; Counsel to
the Funds Group, GSAM since
November 1993; Formerly Asso-
ciate of Shereff Friedman,
Hoffman & Goodman, LLP prior
thereto.
</TABLE>
B-27
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE POSITIONS PRINCIPAL OCCUPATION(S)
AND ADDRESS WITH TRUST DURING PAST 5 YEARS
- --------------------------------- --------------------------------- -------------------------------
<S> <C> <C>
Valerie A. Zondorak, 31 Assistant Vice President, Goldman Sachs
85 Broad Street Secretary (since March 1997); Counsel to
New York, NY 10004 the Funds Group, GSAM (since
March 1997); Associate of
Shereff Friedman, Hoffman &
Goodman LLP (prior thereto).
Steven E. Hartstein, 33 Assistant Legal Products Analyst,
85 Broad Street Secretary Goldman Sachs from June 1993
New York, NY 10004 to present; Funds Compliance
Officer, Citibank Global Asset
Management from August 1991 to
June 1993; Legal Assistant,
Brown & Wood prior thereto.
Deborah A. Farrell, 25 Assistant Administrative Assistant,
85 Broad Street Secretary Goldman Sachs since
New York, NY 10004 January 1994; Formerly at Cleary,
Gottlieb, Steen & Hamilton.
</TABLE>
Certain of the Trustees and officers and the organizations with which they are
associated have had in the past, and may have in the future, transactions with
Northern, Goldman Sachs and their respective affiliates. The Trust has been
advised by such Trustees and officers that all such transactions have been and
are expected to be in the ordinary course of business and the terms of such
transactions, including all loans and loan commitments by such persons, have
been and are expected to be substantially the same as the prevailing terms for
comparable transactions for other customers. Messrs. Springer, Kelsey,
Strubel, Klug, Mosior, Gilman, Richman, Surloff and Hartstein and Mmes. Farrell,
Mucker, Taylor and Zondorak hold similar positions with one or more investment
companies that are advised by Goldman Sachs. As a result of the
responsibilities assumed by Northern under its Advisory Agreement, Transfer
Agency Agreement and Custodian Agreement and Foreign Custody Agreement with the
Trust and by Goldman Sachs under its Administration Agreement and Distribution
Agreement with the Trust, the Trust itself requires no employees.
Each officer holds comparable positions with certain other investment companies
of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser,
administrator and/or distributor.
Each Trustee earns a quarterly retainer of $6,250 and the Chairman of the Board
earns a quarterly retainer of $9,375. Each Trustee, including the Chairman of
the Board, earns an additional
B-28
<PAGE>
fee of $1,500 for each meeting attended, plus reimbursement of expenses incurred
as a Trustee.
In addition, the Trustees established an Audit Committee consisting of three
members including a Chairman of the Committee. Each member earns a fee of
$1,500 for each meeting attended and the Chairman earns a quarterly retainer of
$1,250.
The Trust's officers do not receive fees from the Trust for services in such
capacities, although Goldman Sachs, of which they are also officers, receives
fees from the Trust for administrative services.
The following table sets forth certain information with respect to the
compensation of each Trustee of the Trust for the one-year period ended November
30, 1996:
<TABLE>
<CAPTION>
Total
Compensation
Pension or from
Retirement Registrant
Benefits and
Aggregate Accrued as Fund
Compensation Part of Complex
from Trust's Paid to
Name of Trustee Registrant Expenses Trustees
- --------------------------- ------------ ---------- ------------
<S> <C> <C> <C>
William H. Springer $45,000 $0 $45,000
Edward J. Condon, Jr. $32,500 $0 $32,500
John W. English $31,000 $0 $31,000
James J. Gavin $35,000 $0 $35,500
William B. Jordan* $ 2,083 $0 $ 2,083
Frederick T. Kelsey $35,500 $5,325** $40,825
Richard P. Strubel $40,500 $0 $40,500
</TABLE>
* Retired as of December 31, 1995.
** Interest from deferred compensation.
B-29
<PAGE>
INVESTMENT ADVISER, TRANSFER AGENT AND CUSTODIAN
Northern is one of the nation's leading providers of trust and investment
management services. As of March 30, 1997, Northern had approximately $136.3
billion in assets under management for clients including public and private
retirement funds, endowments, foundations, trusts, corporations, other
investment companies and individuals. Northern is one of the strongest banking
organizations in the United States. Northern believes it has built its
organization by serving clients with integrity, a commitment to quality, and
personal attention. Its stated mission with respect to all its financial
products and services is to achieve unrivaled client satisfaction. With respect
to such clients, the Trust is designed to assist (i) defined contribution plan
sponsors and their employees by offering a range of diverse investment options
to help comply with 404(c) regulation and may also provide educational material
to their employees, (ii) employers who provide post-retirement Employees'
Beneficiary Associations ("VEBA") and require investments that respond to the
impact of federal regulations, (iii) insurance companies with the day-to-day
management of uninvested cash balances as well as with longer-term investment
needs, and (iv) charitable and not-for-profit organizations, such as endowments
and foundations, demanding investment management solutions that balance the
requirement for sufficient current income to meet operating expenses and the
need for capital appreciation to meet future investment objectives.
Subject to the general supervision of the Board of Trustees, Northern makes
decisions with respect to and places orders for all purchases and sales of
portfolio securities for each Portfolio. Northern's Advisory Agreement with the
Trust provides that in selecting brokers or dealers to place orders for
transactions Northern shall attempt to obtain best net price and execution. In
assessing the best overall terms available for any transaction, Northern is to
consider all factors it deems relevant, including the breadth of the market in
the security, the price of the security, the financial condition and execution
capability of the broker or dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a continuing basis. In evaluating
the best overall terms available and in selecting the broker or dealer to
execute a particular transaction, Northern may consider the brokerage and
research services provided to the Portfolios and/or other accounts over which
Northern or an affiliate of Northern exercises investment discretion. These
brokerage and research services may include industry and company analyses,
portfolio services, quantitative data, market information systems and economic
and political consulting and analytical services. Transactions on U.S. stock
exchanges involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary among
different brokers.
B-30
<PAGE>
Transactions on foreign securities exchanges involve payment for brokerage
commissions which are generally fixed. Over-the-counter issues, including
corporate debt and government securities, are normally traded on a "net" basis
(i.e., without commission) through dealers, or otherwise involve transactions
directly with the issuer of an instrument. With respect to over-the-counter
transactions, Northern will normally deal directly with dealers who make a
market in the instruments involved except in those circumstances where more
favorable prices and execution are available elsewhere. The cost of foreign and
domestic securities purchased from underwriters includes an underwriting
commission or concession, and the prices at which securities are purchased from
and sold to dealers include a dealer's mark-up or mark-down.
The Portfolios may participate, if and when practicable, in bidding for the
purchase of portfolio securities directly from an issuer in order to take
advantage of the lower purchase price available to members of a bidding group.
The Portfolios will engage in this practice, however, only when Northern
believes such practice to be in the Portfolios' interests.
Northern's investment advisory duties for the Trust are carried out through its
Trust Department. On occasions when Northern deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other fiduciary
or agency accounts managed by it (including any other Portfolio, investment
company or account for which Northern acts as adviser), the Agreement provides
that Northern, to the extent permitted by applicable laws and regulations, may
aggregate the securities to be sold or purchased for such Portfolio with those
to be sold or purchased for such other accounts in order to obtain the best net
price and execution. In such event, allocation of the securities so purchased
or sold, as well as the expenses incurred in the transaction, will be made by
Northern in the manner it considers to be most equitable and consistent with its
fiduciary obligations to the Portfolio and other accounts involved. In some
instances, this procedure may adversely affect the size of the position
obtainable for a Portfolio or the amount of the securities that are able to be
sold for a Portfolio. To the extent that the execution and price available from
more than one broker or dealer are believed to be comparable, the Agreement
permits Northern, at its discretion but subject to applicable law, to select the
executing broker or dealer on the basis of Northern's opinion of the reliability
and quality of such broker or dealer.
The Advisory Agreement provides that Northern may render similar services to
others so long as its services under such Agreement are not impaired thereby.
The Advisory Agreement also provides that the Trust will indemnify Northern
against certain liabilities (including liabilities under the Federal securities
B-31
<PAGE>
laws relating to untrue statements or omissions of material fact and actions
that are in accordance with the terms of the Agreement) or, in lieu thereof,
contribute to resulting losses.
Under its Transfer Agency Agreement with the Trust, with respect to units held
by Institutions, Northern has undertaken to perform some or all of the following
services: (1) establish and maintain an omnibus account in the name of each
Institution; (2) process purchase orders and redemption requests from an
Institution, furnish confirmations and disburse redemption proceeds; (3) act as
the income disbursing agent of the Trust; (4) answer inquiries from
Institutions; (5) provide periodic statements of account to each Institution;
(6) process and record the issuance and redemption of units in accordance with
instructions from the Trust or its administrator; (7) if required by law,
prepare and forward to Institutions unitholder communications (such as proxy
statements and proxies, annual and semi-annual financial statements, and
dividend, distribution and tax notices); (8) preserve all records; and (9)
furnish necessary office space, facilities and personnel. Under the Transfer
Agency Agreement, with respect to units held by investors, Northern has also
undertaken to perform some or all of the following services: (1) establish and
maintain separate accounts in the name of the investors; (2) process purchase
orders and redemption requests, and furnish confirmations in accordance with
applicable law; (3) disburse redemption proceeds; (4) process and record the
issuance and redemption of units in accordance with instructions from the Trust
or its administrator; (5) act as income disbursing agent of the Trust in
accordance with the terms of the Prospectus and instructions from the Trust or
its administrator; (6) provide periodic statements of account; (7) answer
inquiries (including requests for Prospectuses and Additional Statements, and
assistance in the completion of new account applications) from investors and
respond to all requests for information regarding the Trust (such as current
price, recent performance, and yield data) and questions relating to accounts of
investors (such as possible errors in statements, and transactions); (8) respond
to and seek to resolve all complaints of investors with respect to the Trust or
their accounts; (9) furnish proxy statements and proxies, annual and semi-annual
financial statements, and dividend, distribution and tax notices to investors;
(10) furnish the Trust all pertinent Blue Sky information; (11) perform all
required tax withholding; (12) preserve records; and (13) furnish necessary
office space, facilities and personnel. Northern may appoint one or more sub-
transfer agents in the performance of its services.
As compensation for the services rendered by Northern under the Transfer Agency
Agreement and the assumption by Northern of related expenses, Northern is
entitled to a fee from the Trust, payable monthly, at an annual rate of .01%,
.05%, .10% and .15%
B-32
<PAGE>
of the average daily net asset value of the Class A, B, C and D units,
respectively, in the Portfolios.
Under its Custodian Agreement (and in the case of the International Bond
Portfolio its Foreign Custody Agreement) with the Trust, Northern (1) holds each
Portfolio's cash and securities, (2) maintains such cash and securities in
separate accounts in the name of the Portfolio, (3) makes receipts and
disbursements of funds on behalf of the Portfolio, (4) receives, delivers and
releases securities on behalf of the Portfolio, (5) collects and receives all
income, principal and other payments in respect of the Portfolio's investments
held by Northern under the Agreement, and (6) maintains the accounting records
of the Trust. Northern may employ one or more subcustodians, provided that
Northern shall have no more responsibility or liability to the Trust on account
of any action or omission of any subcustodian so employed than such subcustodian
has to Northern and that the responsibility or liability of the subcustodian to
Northern shall conform to the resolution of the Trustees of the Trust
authorizing the appointment of the particular subcustodian (or, in the case of
foreign securities, to the terms of any agreement entered into between Northern
and such subcustodian to which such resolution relates). In addition, the
Trust's custodial arrangements provide, with respect to foreign securities, that
Northern shall not be: (i) responsible for the solvency of any subcustodian
appointed by it with reasonable care; (ii) responsible for any act, omission,
default or for the solvency of any eligible foreign securities depository; or
(iii) liable for any loss, damage, cost, expense, liability or claim resulting
from nationalization, expropriation, currency restrictions, or acts of war or
terrorism or any loss where the subcustodian has otherwise exercised reasonable
care. Northern may also appoint agents to carry out such of the provisions of
the Custodian Agreement and the Foreign Custody Agreement as Northern may from
time to time direct, provided that the appointment of an agent shall not relieve
Northern of any of its responsibilities under either Agreement. Northern has
entered into agreements with financial institutions and depositories located in
foreign countries with respect to the custody of the Portfolios' foreign
securities.
As compensation for the services rendered to the Trust by Northern as custodian
to the Short Duration, U.S. Government Securities, Short-Intermediate Bond, U.S.
Treasury Index, Bond and Intermediate Bond Portfolios, and the assumption by
Northern of certain related expenses, Northern is entitled to payment from the
Trust as follows: (i) $18,000 annually for each Portfolio, plus (ii) 1/100th of
1% annually of each Portfolio's average daily net assets to the extent they
exceed $100 million, plus (iii) a fixed dollar fee for each trade in portfolio
securities, plus (iv) a fixed dollar fee for each time that Northern as
Custodian receives or transmits funds via wire, plus (v)
B-33
<PAGE>
reimbursement of expenses incurred by Northern as custodian for telephone,
postage, courier fees, office supplies and duplicating. The fees referred to in
clauses (iii) and (iv) are subject to annual upward adjustments based on
increases in the Consumer Price Index for All Urban Consumers, provided that
Northern may permanently or temporarily waive all or any portion of any upward
adjustment.
As compensation for the services rendered to the Trust under the Foreign Custody
Agreement with respect to the International Bond Portfolio, and the assumption
by Northern of certain related expenses, Northern is entitled to payment from
the Trust as follows: (i) $35,000 annually for the International Bond
Portfolio, plus (ii) 9/100th of 1% annually of the Portfolio's average daily net
assets, plus (iii) reimbursement for fees incurred by Northern as foreign
Custodian for telephone, postage, courier fees, office supplies and duplicating.
Unless sooner terminated, the Advisory Agreement, Custodian Agreement (or in the
case of the International Bond Portfolio the Foreign Custody Agreement) and
Transfer Agency Agreement between Northern and the Trust will continue in effect
with respect to a particular Portfolio until April 30, 1998 and thereafter for
successive 12-month periods, provided that the continuance is approved at least
annually (1) by the vote of a majority of the Trustees who are not parties to
the agreement or "interested persons" (as such term is defined in the 1940 Act)
of any party thereto, cast in person at a meeting called for the purpose of
voting on such approval and (2) by the Trustees or by the vote of a majority of
the outstanding units of such Portfolio (as defined below under "Other
Information"). Each agreement is terminable at any time without penalty by the
Trust (by specified Trustee or unitholder action) on 60 days' written notice to
Northern and by Northern on 60 days' written notice to the Trust.
For the fiscal periods ended November 30 as indicated, the amount of the
Advisory Fee incurred by each Portfolio (after fee waivers) was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $ 72,840 $108,537 $230,429
U.S. Government Securities
Portfolio (2) 219,457 77,685 67,880
Short-Intermediate Bond
Portfolio (3) 421,548 305,155 260,009
U.S. Treasury Index Portfolio (3) 26,172 49,400 83,790
Bond Portfolio (3) 830,217 663,400 608,504
International Bond Portfolio (4) 224,098 224,564 $122,985
</TABLE>
- --------------
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
B-34
<PAGE>
For the same fiscal periods ended November 30 as indicated.
Northern waived additional advisory fees as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $ 121,294 $180,999 $384,049
U.S. Government Securities
Portfolio (2) 307,297 108,759 95,031
Short-Intermediate Bond
Portfolio (3) 589,702 427,217 364,019
U.S. Treasury Index Portfolio (3) 43,719 82,333 139,653
Bond Portfolio (3) 1,162,601 928,746 851,339
International Bond Portfolio (4) 63,958 64,150 34,908
- --------
</TABLE>
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, the amount of the
Transfer Agency Fee incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Short Duration Portfolio (1) $ 0 $ 1,135 $ 1,000
U.S. Government Securities
Portfolio (2) 12,058 3,163 2,980
Short-Intermediate Bond
Portfolio (3) 16,929 12,216 10,000
U.S. Treasury Index Portfolio (3) 2,414 3,366 6,173
Bond Portfolio (3) 39,420 28,014 24,006
International Bond Portfolio (4) 3,220 3,209 2,000
- ---------
</TABLE>
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated, the amount of the
Custodian Fee (and, in the case of the International Bond Portfolio, the Foreign
Custodian Fee) incurred by each Portfolio was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ --------
<S> <C> <C> <C>
Short Duration Portfolio (1) $31,619 48,371 $47,000
U.S. Government Securities
Portfolio (2) 19,709 23,744 24,000
Short-Intermediate Bond
Portfolio (3) 28,060 24,834 22,343
U.S. Treasury Index Portfolio (3) 20,242 22,734 23,070
Bond Portfolio (3) 46,249 35,344 36,609
International Bond Portfolio (4) 67,555 46,838 25,000
- --------
</TABLE>
B-35
<PAGE>
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
Banking laws and regulations currently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered open-end investment company continuously
engaged in the issuance of its shares, but such banking laws and regulations do
not prohibit such a holding company or affiliate or banks generally from acting
as investment adviser, transfer agent or custodian to such an investment
company, or from purchasing shares of such a company as agent for and upon the
order of customers. Northern believes that it may perform the services
contemplated by its agreements with the Trust without violation of such banking
laws or regulations, which are applicable to it. It should be noted, however,
that future changes in either Federal or state statutes and regulations relating
to the permissible activities of banks and their subsidiaries or affiliates, as
well as future judicial or administrative decisions or interpretations of
current and future statutes and regulations, could prevent Northern from
continuing to perform such services for the Trust.
Should future legislative, judicial or administrative action prohibit or
restrict the activities of Northern in connection with the provision of services
on behalf of the Trust, the Trust might be required to alter materially or
discontinue its arrangements with Northern and change its method of operations.
It is not anticipated, however, that any change in the Trust's method of
operations would affect the net asset value per unit of any Portfolio or result
in a financial loss to any unitholder. Moreover, if current restrictions
preventing a bank from legally sponsoring, organizing, controlling or
distributing units of an open-end investment company were relaxed, the Trust
expects that Northern would consider the possibility of offering to perform some
or all of the services now provided by Goldman Sachs. It is not possible, of
course, to predict whether or in what form such restrictions might be relaxed or
the terms upon which Northern might offer to provide services for consideration
by the Trustees.
Goldman Sachs is also an active investor, dealer and/or underwriter in many
types of stocks, bonds and other instruments. Its activities in this regard
could have some effect on the market for those instruments which the Portfolios
acquire, hold or sell.
In the Advisory Agreement, Northern agrees that the name "The Benchmark" may be
used in connection with the Trust's business on
B-36
<PAGE>
a royalty-free basis. Northern has reserved to itself the right to grant the
non-exclusive right to use the name "The Benchmark" to any other person. The
Advisory Agreement provides that at such time as the Agreement is no longer in
effect, the Trust will cease using the name "The Benchmark." (This undertaking
by the Trust may be subject to certain legal limitations.)
PORTFOLIO TRANSACTIONS
- ----------------------
To the extent that a Portfolio effects brokerage transactions with Goldman Sachs
or any broker-dealer affiliated directly or indirectly with Northern, such
transactions, including the frequency thereof, the receipt of any commissions
payable in connection therewith, and the selection of the affiliated broker-
dealer effecting such transactions, will be fair and reasonable to the
unitholders of the Portfolio. For the past three fiscal years, none of the
Portfolios paid brokerage commissions.
During the fiscal year ended November 30, 1996, the Short Duration Portfolio
acquired and sold securities of Bear Stearns & Co., Donaldson, Lufkin & Jenrette
Securities, Inc. and Swiss Bank, each a regular broker/dealer. At November 30,
1996, the Short Duration Portfolio owned the following amounts of securities of
its regular broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or
their parents: Bear Stearns & Co., with an approximate aggregate value of
$10,000,000, Donaldson, Lufken & Jenrette Securities, Inc., with an approximate
aggregate value of $3,000 and Swiss Bank, with an approximate aggregate value of
$1,000,000.
During the fiscal year ended November 30, 1996, the Short-Intermediate Bond
Portfolio acquired and sold securities of Salomon Brothers, Inc. and Donaldson,
Lufkin & Jenrette Securities, Inc. each a regular broker/dealer. At November 30,
1996, the Short-Intermediate Bond Portfolio owned the following amounts of
securities of its regular broker/dealers, as defined in Rule 10b-1 under the
1940 Act, or their parents: Salomon Brothers, Inc., with an approximate
aggregate value of $4,982,000 and Donaldson, Lufkin & Jenrette Securities, Inc.,
with an approximate aggregate market value of $8,826,000.
During the fiscal year ended November 30, 1996, the Bond Portfolio acquired and
sold securities of Salomon Brothers, Inc. and Donaldson, Lufkin & Jenrette
Securities, Inc., each a regular broker/dealer. At November 30, 1996, the Bond
Portfolio owned the following amounts of securities of its regular
broker/dealers, as defined in Rule 10b-1 under the 1940 Act, or their parents:
Salomon Brothers, Inc., with an approximate aggregate market value of $9,515,000
and Donaldson, Lufkin & Jenrette Securities, Inc., with an approximate aggregate
market value of $7,450,000.
B-37
<PAGE>
ADMINISTRATOR AND DISTRIBUTOR
Under its Administration Agreement with the Trust, Goldman Sachs, subject to the
general supervision of the Trust's Board of Trustees, acts as the Trust's
Administrator. In this capacity, Goldman Sachs (1) provides supervision of
certain aspects of the Trust's non-investment advisory operations (the parties
giving recognition to the fact that certain of such operations are performed by
Northern pursuant to the Trust's agreements with Northern), (2) provides the
Trust, to the extent not provided pursuant to such agreements, with such
personnel as are reasonably necessary for the conduct of the Trust's affairs,
(3) arranges, to the extent not provided pursuant to such agreements, for the
preparation at the Trust's expense of its tax returns, reports to unitholders,
periodic updating of the Prospectus issued by the Trust, and reports filed with
the SEC and other regulatory authorities (including qualification under state
securities or Blue Sky laws of the Trust's units), and (4) provides the Trust,
to the extent not provided pursuant to such agreements, with adequate office
space and equipment and certain related services in Chicago.
For the fiscal periods ended November 30 as indicated, Goldman Sachs received
fees under the Administration Agreement (after fee waivers) in the amount of:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Short Duration Portfolio (1) $121,399 $180,895 $328,204
U.S. Government Securities
Portfolio (2) 87,782 31,074 27,152
Short-Intermediate Bond
Portfolio (3) 168,616 122,062 104,003
U.S. Treasury Index Portfolio (3) 17,448 32,933 55,859
Bond Portfolio (3) 332,084 265,356 243,234
International Bond Portfolio (4) 32,014 32,075 17,569
- --------
</TABLE>
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
For the fiscal periods ended November 30 as indicated and prior to May 1, 1997,
Goldman Sachs voluntarily agreed to waive a portion of its Administration Fee
for each Portfolio then in existence other than the Short Duration Portfolio
resulting in an effective fee of .10% of the average daily net assets for each
Portfolio. The effect of these waivers by Goldman Sachs was to reduce
Administration Fees by the following amounts:
B-38
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------- -------- --------
<S> <C> <C> <C>
- --
U.S. Government Securities
Portfolio (1) 131,975 $ 46,611 $ 40,727
Short-Intermediate Bond
Portfolio (2) 185,161 161,031 162,000
U.S. Treasury Index Portfolio (2) 26,353 49,400 83,790
Bond Portfolio (2) 243,306 232,678 221,000
International Bond Portfolio (3) 48,221 48,112 26,180
</TABLE>
(1) Commenced investment operations on April 5, 1993.
(2) Commenced investment operations on January 11, 1993.
(3) Commenced investment operations on March 28, 1994.
In addition, pursuant to an undertaking that commenced August 1, 1992, Goldman
Sachs has agreed that, if its administration fees (less expense reimbursements
paid by Goldman Sachs to the Trust and less certain marketing expenses paid by
Goldman Sachs) exceed a specified amount ($1 million for the Trust's first
twelve investment portfolios plus $50,000 for each additional portfolio) during
the current fiscal year, Goldman Sachs will waive a portion of its
administration fees during the following fiscal year. This undertaking may be
terminated by Goldman Sachs at any time without the consent of the Trust or the
unitholders. There have been no waivers pursuant to this agreement during the
last three fiscal periods.
Goldman Sachs has agreed for the current fiscal year to reimburse each Portfolio
for all expenses (including fees payable to Goldman Sachs as administrator, but
excluding the fees payable to Northern for its duties as investment adviser or
transfer agent, servicing fees and extraordinary expenses) which exceed on an
annualized basis .25% of the International Bond Portfolio's average daily net
assets and .10% of each other Portfolio's average daily net assets. Prior to May
1, 1997, this undertaking was contractual with respect to the Short Duration
Portfolio, but voluntary with respect to the other Portfolios. As of May 1,
1997, this undertaking is contractual with respect to all Porfolios. The effect
of these reimbursements by Goldman Sachs for the fiscal periods ended November
30 as indicated, were to reduce the expenses of each Portfolio by:
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Short Duration Portfolio (1) $152,596 $213,702 $422,251
U.S. Government Securities
Portfolio (2) 68,799 72,798 67,523
Short-Intermediate Bond
Portfolio (3) 97,056 87,069 82,935
</TABLE>
B-39
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
U.S. Treasury Index Portfolio (3) 67,218 76,730 72,034
Bond Portfolio (3) 142,673 112,995 156,721
International Bond Portfolio (4) 87,159 52,493 30,840
- --------
</TABLE>
(1) Commenced investment operations on June 2, 1993.
(2) Commenced investment operations on April 5, 1993.
(3) Commenced investment operations on January 11, 1993.
(4) Commenced investment operations on March 28, 1994.
Unless sooner terminated the Administration Agreement will continue in effect
with respect to a particular Portfolio until April 30, 1998, and thereafter for
successive 12-month periods, provided that the agreement is approved annually
(1) by the vote of a majority of the Trustees who are not parties to the
agreement or "interested persons" (as such term is defined by the 1940 Act) of
any party thereto, cast in person at a meeting called for the purpose of voting
on such approval, and (2) by the Trustees or by the vote of a majority of the
outstanding units of such Portfolio (as defined below under "Other
Information"). The Administration Agreement is terminable at any time without
penalty by the Trust (upon specified Trustee or unitholder action) on 60 days'
written notice to Goldman Sachs and by Goldman Sachs on 60 days' written notice
to the Trust.
The Trust has entered into a Distribution Agreement under which Goldman Sachs,
as agent, sells units of each Portfolio on a continuous basis. Goldman Sachs
pays the cost of printing and distributing prospectuses to persons who are not
unitholders of the Trust (excluding preparation and typesetting expenses) and of
certain other distribution efforts. No compensation is payable by the Trust to
Goldman Sachs for such distribution services.
The Administration Agreement and the Distribution Agreement provide that Goldman
Sachs may render similar services to others so long as its services under such
Agreements are not impaired thereby. The Administration Agreement provides that
the Trust will indemnify Goldman Sachs against certain liabilities (including
liabilities under the Federal securities laws relating to untrue statements or
omissions of material fact and actions that are in accordance with the terms of
the Administration Agreement and Distribution Agreement) or, in lieu thereof,
contribute to resulting losses.
UNITHOLDER SERVICING PLAN
As stated in the Portfolios' Prospectus, Institutions may enter into Servicing
Agreements with the Trust under which they provide (or arrange to have provided)
support services to their Customers or other investors who beneficially own such
units in
B-40
<PAGE>
consideration of the Portfolios' payment of not more than .10%, .15% and .25%
(on an annualized basis) of the average daily net asset value of the Class B, C
and D units, respectively, of the U.S. Government Securities, Short-Intermediate
Bond, U.S. Treasury Index, Bond and International Bond Portfolios beneficially
owned by such Customers or investors.
For the fiscal periods ended November 30 as indicated, the aggregate amount of
the Unitholder Service Fee incurred by each class of each Portfolio then in
existence was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- -----
<S> <C> <C> <C>
U.S. Government Securities Portfolio
Class B N/A N/A N/A
Class C (6) $5,040.82 N/A N/A
Class D (1) 451.87 $ 97.59 $3.47
Short-Intermediate Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (2) 126.73 16.96 0.30
U.S. Treasury Index Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (3) 1,198.29 129.80 0.03
Bond Portfolio
Class B N/A N/A N/A
Class C(4) 6,685.99 2,292.16 N/A
Class D (2) 396.78 180.56 3.70
International Bond Portfolio
Class B N/A N/A N/A
Class C N/A N/A N/A
Class D (5) 29.96 0.48 N/A
</TABLE>
(1) Class D Units were issued on September 15, 1994.
(2) Class D Units were issued on September 14, 1994.
(3) Class D Units were issued on November 16, 1994.
(4) Class C Units were issued on July 3, 1995.
(5) Class D Units were issued on November 20, 1995.
(6) Class C Units were issued on December 29, 1995.
Services provided by or arranged to be provided by Institutions under their
Servicing Agreements may include: (1) establishing and maintaining separate
account records of Customers or other investors; (2) providing Customers or
other investors with a service that invests their assets in units of certain
classes pursuant to specific or pre-authorized instructions, and assistance with
new account applications; (3) aggregating and processing purchase and redemption
requests for units of certain classes from Customers or other investors, and
placing purchase and redemption orders with the Transfer Agent; (4) issuing,
confirmations to Customers or other investors in accordance with
B-41
<PAGE>
applicable law; (5) arranging for the timely transmission of funds representing
the net purchase price or redemption proceeds; (6) processing dividend payments
on behalf of Customers or other investors; (7) providing information
periodically to Customers or other investors showing their positions in units;
(8) responding to Customer or other investor inquiries (including requests for
prospectuses), and complaints relating to the services performed by the
Institutions; (9) acting as liaison with respect to all inquiries and complaints
from Customers and other investors relating to errors committed by the Trust or
its agents, and other matters pertaining to the Trust; (10) providing or
arranging for another person to provide subaccounting with respect to units of
certain classes beneficially owned by Customers or other investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other investors; (12) providing such office space, facilities and personnel
as may be required to perform its services under the Servicing Agreements; (13)
maintaining appropriate management reporting and statistical information; (14)
paying expenses related to the preparation of educational and other explanatory
materials in connection with the development of investor services; (15)
developing and monitoring investment programs; and (16) providing such other
similar services as the Trust may reasonably request to the extent the
Institutions are permitted to do so under applicable statutes, rules and
regulations.
The Trust's agreements with Institutions are governed by a Plan (called the
"Unitholder Servicing Plan") which has been adopted by the Board of Trustees.
Pursuant to the Unitholder Servicing Plan, the Board of Trustees will review, at
least quarterly, a written report of the amounts expended under the Trust's
agreements with Institutions and the purposes for which the expenditures were
made. In addition, the arrangements with Institutions must be approved annually
by a majority of the Board of Trustees, including a majority of the Trustees who
are not "interested persons" of the Trust, as defined in the 1940 Act, and have
no direct or indirect financial interest in such arrangements.
The Board of Trustees has approved the arrangements with Institutions based on
information provided by the Trust's service contractors that there is a
reasonable likelihood that the arrangements will benefit the Portfolios and
their unitholders by affording the Portfolios greater flexibility in connection
with the servicing of the accounts of the beneficial owners of their units in an
efficient manner.
B-42
<PAGE>
COUNSEL AND AUDITORS
Drinker Biddle & Reath LLP, with offices at 1345 Chestnut Street, Suite 1100,
Philadelphia, Pennsylvania 19107, serve as counsel to the Trust.
Ernst & Young LLP, independent auditors, 233 S. Wacker Drive, Chicago,
Illinois 60606-6301, have been selected as auditors of the Trust. In addition
to audit services, Ernst & Young LLP reviews the Trust's Federal and state tax
returns, and provides consultation and assistance on accounting, internal
control and related matters.
IN-KIND PURCHASES
Payment for units of a Portfolio may, in the discretion of Northern, be made in
the form of securities that are permissible investments for the Portfolio as
described in the Prospectus. For further information about this form of
payment, contact Northern. In connection with an in-kind securities payment, a
Portfolio will require, among other things, that the securities be valued on the
day of purchase in accordance with the pricing methods used by the Portfolio and
that the Portfolio receive satisfactory assurances that it will have good and
marketable title to the securities received by it; that the securities be in
proper form for transfer to the Portfolio; and that adequate information be
provided concerning the basis and other tax matters relating to the securities.
PERFORMANCE INFORMATION
Each Portfolio that advertises an "average annual total return" for a class of
units computes such return by determining the average annual compounded rate of
return during specified periods that equates the initial amount invested to the
ending redeemable value of such investment according to the following formula:
ERV 1/n
T = ( --- ) - 1
P
Where: T = average annual total return;
ERV = ending redeemable value at the end of the applicable period
(or fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year (or
other) period;
P = hypothetical initial payment of $1,000; and
B-43
<PAGE>
n = period covered by the computation, expressed in years.
Each Portfolio that advertises an "aggregate total return" for a class of units
computes such return by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount invested to the
ending redeemable value of such investment. The formula for calculating
aggregate total return is as follows:
ERV
T = [( --- )] - 1
P
The calculations are made assuming that (1) all dividends and capital gain
distributions are reinvested on the reinvestment dates at the price per unit
existing on the reinvestment date and (2) all recurring fees charged to all
unitholder accounts are included. The ending redeemable value (variable "ERV"
in the formula) is determined by assuming complete redemption of the
hypothetical investment after deduction of all nonrecurring charges at the end
of the measuring period.
The average annual total returns and aggregate total returns shown below for the
Short-Intermediate Bond, U.S. Treasury Index and Bond Portfolios include, for
periods prior to the commencement of the Portfolios' operations, the performance
of a predecessor collective fund adjusted to reflect the higher estimated fees
and expenses applicable to such Portfolios' Class A Units at the time of their
inception. Although all such predecessor collective funds were managed by
Northern for the periods stated in a manner and pursuant to investment
objectives that were equivalent in all material respects to the management and
investment objectives of the corresponding Portfolios, such predecessor
collective funds were not registered under the 1940 Act and were not subject to
certain investment restrictions imposed by the 1940 Act. If they had been
registered under the 1940 Act, performance might have been adversely affected.
The average annual total returns and aggregate total returns shown for the
Portfolios for their Class C and/or Class D Units also include, for the periods
prior to the inception of such classes, the performance of the Portfolios' Class
A Units. Because the fees and expenses of Class C and Class D Units are,
respectively, 0.24% and 0.39% higher than those of Class A Units, actual
performance for periods prior to the inception of Class C and Class D Units
would have been lower if such higher fees and expenses had been taken into
account.
Following commencement of operations of the Portfolios, Goldman Sachs reimbursed
expenses to the Portfolios and voluntarily
B-44
<PAGE>
agreed to reduce a portion of its administration fee for each Portfolio pursuant
to the undertaking described above under "Additional Trust Information -
Administrator and Distributor" and "-Investment Adviser, Transfer Agent and
Custodian," and Northern waived a portion of its investment advisory fees with
respect to the Portfolios. The average annual total returns and aggregate total
returns of each Portfolio with respect to Class A, Class C and Class D Units, as
applicable, are shown below with and without such fee waivers and expense
reimbursements.
B-45
<PAGE>
<TABLE>
<CAPTION>
FOR PERIODS ENDED NOVEMBER 30, 1996
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
Since Since
1 Year 5 Year 10 Year Inception 1 Year 5 Year 10 Year Inception
--------- --------- --------- --------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BOND/1/
CLASS A
with fee waivers and
expense reimbursements 5.57% 8.93% 9.08% - 5.57% 53.38% 138.39% -
w/o fee waivers and
expense reimbursements 5.07 8.39 8.55 - 5.07 49.60 127.04 -
CLASS C
with fee waivers and
expense reimbursements 5.33 8.86 9.04 - 5.33 52.89 137.64 -
w/o fee waivers and
expense reimbursements 4.83 8.32 8.51 - 4.83 49.12 126.30 -
CLASS D
with fee waivers and
expense reimbursements 5.17 8.75 8.98 - 5.17 52.04 136.30 -
w/o fee waivers and
expense reimbursements 4.67 8.21 8.45 - 4.67 48.33 125.12 -
SHORT-INTERMEDIATE BOND/2/
CLASS A
with fee waivers and
expense reimbursements 5.68 6.41 7.11 - 5.68 36.41 98.79 -
w/o fee waivers and
expense reimbursements 5.13 5.80 6.52 - 5.13 32.59 88.02 -
CLASS D
with fee waivers and
expense reimbursements 5.22 6.20 7.01 - 5.22 35.21 97.03 -
w/o fee waivers and
expense reimbursements 4.67 5.60 6.41 - 4.67 31.32 86.21 -
</TABLE>
B-46
<PAGE>
<TABLE>
<CAPTION>
FOR PERIODS ENDED NOVEMBER 30, 1996
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
Since Since
1 Year 5 Year 10 Year Inception 1 Year 5 Year 10 Year Inception
--------- --------- --------- --------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. TREASURY INDEX/3/
CLASS A
with fee waivers and
expense reimbursements 5.10% 7.56% - 8.06% 5.10% 43.97% - 115.87%
w/o fee waivers and
expense reimbursements 4.29 6.89 - 7.39 4.29 39.53 - 102.97
CLASS D
with fee waivers and
expense reimbursements 4.72 7.39 - 7.98 4.72 42.84 - 114.17
w/o fee waivers and
expense reimbursements 3.91 6.72 - 7.30 3.91 38.43 - 101.26
SHORT DURATION/4/
with fee waivers and
expense reimbursements 5.45 - - 4.84 5.45 - - 18.00
w/o fee waivers and
expense reimbursements 4.77 - - 4.30 4.77 - - 15.89
U.S. GOVERNMENT SECURITIES/5/
CLASS A
with fee waivers and
expense reimbursements 5.15 - - 5.04 5.15 - - 19.73
w/o fee waivers and
expense reimbursements 4.54 - - 4.31 4.54 - - 16.71
CLASS C
with fee waivers and
expense reimbursements 4.93 - - 4.98 4.91 - - 19.46
w/o fee waivers and
expense reimbursements 4.29 - - 4.26 4.29 - - 16.51
</TABLE>
B-47
<PAGE>
<TABLE>
<CAPTION>
FOR PERIODS ENDED NOVEMBER 30, 1996
AVERAGE ANNUAL TOTAL RETURNS AGGREGATE TOTAL RETURNS
Since Since
1 Year 5 Year 10 Year Inception 1 Year 5 Year 10 Year Inception
--------- --------- --------- --------- -------- ------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS D
with fee waivers and
expense reimbursements 4.77% - - 4.77% 4.77% - - 18.58%
w/o fee waivers and
expense reimbursements 4.17 - - 4.04 4.17 - - 15.60
INTERNATIONAL BOND/6/
CLASS A
with fee waivers and
expense reimbursements 9.47 - - 11.72 9.47 - - 34.61
w/o fee waivers and
expense reimbursements 8.80 - - 11.10 8.80 - - 32.63
CLASS D
with fee waivers and
expense reimbursements 9.04 - - 11.55 9.04 - - 34.09
w/o fee waivers and
expense reimbursements 8.37 - - 10.94 8.37 - - 32.10
- ----------------------
</TABLE>
1. For Class A, C and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class C and D Units, performance data from January 11, 1993 to July 3, 1995
(commencement of Class C Units) and September 14, 1994 (commencement of
Class D Units), respectively, is that of Class A Units. Because the fees
and expenses of Class C and Class D Units are .24% and .39%, respectively,
higher than those of Class A Units, actual performance would have been
lower had such fees and expenses been taken into account. The predecessor
collective fund has been managed in a manner and pursuant to investment
objectives equivalent in all material respects to the management and
investment objective of the Portfolio for the periods shown. The
performance data of the predecessor collective fund is adjusted to reflect
the higher fees and expenses applicable to Class A Units at the time of
their inception.
2. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to September 14, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. The predecessor collective fund
B-48
<PAGE>
has been managed in a manner and pursuant to investment objectives
equivalent in all material respects to the management and investment
objective of the Portfolio for the periods shown. The performance data of
the predecessor collective fund is adjusted to reflect the higher fees and
expenses applicable to Class A Units at the time of their inception.
3. For Class A and D Units, performance data prior to January 11, 1993
(commencement of Portfolio) is that of a predecessor collective fund. For
Class D Units, performance data from January 11, 1993 to November 16, 1994
(commencement of Class D Units) is that of Class A Units. Because the fees
and expenses of Class D Units are .39% higher than those of Class A Units,
actual performance would have been lower had such higher fees and expenses
been taken into account. Performance data of the predecessor collective
fund is shown from January 1, 1987, the date from which the predecessor
fund has been managed in a manner and pursuant to investment objectives
equivalent in all material respects to the management and investment
objective of the Portfolio. The performance data of the predecessor
collective fund is adjusted to reflect the higher fees and expenses
applicable to Class A Units at the time of their inception.
4. Performance data for the units is shown from June 2, 1993 (commencement of
the Portfolio).
5. For Class C and D Units, performance data prior to December 29, 1995
(commencement of Class C Units), and September 15, 1994 (commencement of
Class D Units), respectively, is that of Class A Units. Class A Units
commenced operations April 5, 1993. Because fees and expenses of Class C
and D Units are .24% and .39%, respectively, higher than those of Class A
Units, actual performance would have been lower had such higher fees and
expenses been taken into account.
6. For Class D Units, performance data prior to November 20, 1995
(commencement of Class D Units) is that of Class A Units. Class A Units
commenced operations on March 28, 1994. Because the fees and expenses of
Class D Units are .39% higher than those of Class A Units, actual
performance would have been lower had such higher fees and expenses been
taken into account.
B-49
<PAGE>
The Portfolios' 30-day (or one month) standard yield described in the Prospectus
is calculated for each class of the Portfolios in accordance with the method
prescribed by the SEC for mutual funds:
Yield = 2 [(a-b + 1)/6/ - 1]
---
cd
Where: a = dividends and interest earned by a Portfolio
during the period;
b = expenses accrued for the period (net of reimbursements);
c = average daily number of units outstanding during the
period entitled to receive dividends; and
d = net asset value per unit on the last day of the period.
For the 30 day period ended November 30, 1996, the annualized yields for the
Class A, Class B, Class C and Class D units of the Portfolios were as follows:
<TABLE>
<CAPTION>
30-Day Yield
-------------
<S> <C> <C> <C>
Short Duration Portfolio 5.21%
U.S. Government Securities
Portfolio
Class A 5.56
Class B N/A
Class C 5.32
Class D 5.17
Short-Intermediate Bond
Portfolio
Class A 6.08
Class B N/A
Class C N/A
Class D 4.94
U.S. Treasury Index Portfolio
Class A 5.95
Class B N/A
Class C N/A
Class D 5.56
Bond Portfolio
Class A 5.83
Class B N/A
Class C 5.58
Class D 5.45
</TABLE>
B-50
<PAGE>
<TABLE>
<S> <C> <C> <C>
30-Day Yield
------------
International Bond Portfolio
Class A 4.78%
Class B N/A
Class C N/A
Class D 4.42
</TABLE>
The information set forth in the foregoing table reflects certain fee reductions
and expense limitations. See "Investment Adviser, Transfer Agent and Custodian"
and "Administrator and Distributor" under "Additional Trust Information." In
the absence of such fee reductions and expense limitations, the annualized 30-
day yields of each Portfolio with respect to Class A, Class B, Class C and Class
D units would have been as follows:
<TABLE>
<CAPTION>
30-Day Yield
-------------
<S> <C>
Short Duration Portfolio 4.63%
U.S. Government Securities
Portfolio
Class A 4.97
Class B N/A
Class C 4.73
Class D 4.51
Short-Intermediate Bond Portfolio
Class A 5.55
Class B N/A
Class C N/A
Class D 4.41
U.S. Treasury Index Portfolio
Class A 5.19
Class B N/A
Class C N/A
Class D 4.80
Bond Portfolio
Class A 5.37
Class B N/A
Class C 5.12
Class D 4.99
International Bond Portfolio
Class A 4.25
Class B N/A
Class C N/A
Class D 3.89
</TABLE>
The performance of any investment is generally a function of portfolio quality
and maturity, type of investment and operating expenses.
Because of the different Servicing Fees and transfer agency fees payable with
respect to Class A, B, C and D units in a Portfolio,
B-51
<PAGE>
performance quotations for units of Class B, C and D of the Portfolio will be
lower than the quotations for Class A units of the Portfolio, which will not
bear any fees for unitholder support services and will bear minimal transfer
agency fees.
TAXES
The following summarizes certain additional tax considerations generally
affecting the Portfolios and their unitholders that are not described in the
Portfolios' Prospectuses. No attempt is made to present a detailed explanation
of the tax treatment of the Portfolios or their unitholders, and the discussion
here and in the applicable Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers
with specific reference to their own tax situations.
GENERAL
Each Portfolio will elect to be taxed separately as a regulated investment
company under Part I of Subchapter M of Subtitle A, Chapter 1 of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, each Portfolio generally is exempt from Federal income tax on its net
investment income and realized capital gains which it distributes to
unitholders, provided that it distributes an amount equal to at least 90% of its
investment company taxable income (net investment income and the excess of net
short-term capital gain over net long-term capital loss), if any, for the year
(the "Distribution Requirement") and satisfies certain other requirements of the
Code that are described below.
In addition to satisfying the Distribution Requirement, each Portfolio must
derive with respect to a taxable year at least 90% of its gross income from
dividends, interest, certain payments with respect to securities loans and gains
from the sale or other disposition of stock or securities or foreign currencies,
or from other income derived with respect to its business of investing in such
stock, securities, or currencies (the "Income Requirement") and derive less than
30% of its gross income from the sale or other disposition of securities and
certain other investments held for less than three months (the "Short-Short
Test"). Interest (including original issue discount and "accrued market
discount") received by a Portfolio at maturity or on disposition of a security
held for less than three months will not be treated as gross income from the
sale or other disposition of such security within the meaning of this
requirement. However any other income which is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
B-52
<PAGE>
In addition to the foregoing requirements, at the close of each quarter of its
taxable year, at least 50% of the value of each Portfolio's assets must consist
of cash and cash items, U.S. Government securities, securities of other
regulated investment companies, and securities of other issuers (as to which a
Portfolio has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Portfolio does not hold more than
10% of the outstanding voting securities of such issuer) and no more than 25% of
the value of each Portfolio's total assets may be invested in the securities of
any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Portfolio
controls and which are engaged in the same or similar trades or businesses.
Each Portfolio intends to distribute to unitholders any excess of net long-term
capital gain over net short-term capital loss ("net capital gain") for each
taxable year. Such gain is distributed as a capital gain dividend and is
taxable to unitholders as long-term capital gain, regardless of the length of
time the unitholder has held the units, whether such gain was recognized by the
Portfolio prior to the date on which a unitholder acquired units of the
Portfolio and whether the distribution was paid in cash or reinvested in units.
In addition, investors should be aware that any loss realized upon the sale,
exchange or redemption of units held for six months or less will be treated as a
long-term capital loss to the extent of the capital gain dividends the
unitholder has received with respect to such units. It is not expected that any
distributions will qualify for the dividends received deduction for
corporations.
Ordinary income of individuals is taxable at a maximum marginal rate of 39.6%,
but because of limitations on itemized deductions otherwise allowable and the
phase-out of personal exemptions, the maximum effective marginal rate of tax for
some taxpayers may be higher. An individual's long-term capital gains are
taxable at a maximum nominal rate of 28%. Capital gains and ordinary income of
corporate taxpayers are both taxed at a nominal maximum rate of 35%.
If for any taxable year any Portfolio does not qualify as a regulated investment
company, all of its taxable income will be subject to tax at regular corporate
rates without any deduction for distributions to unitholders. In such event,
all distributions (whether or not derived from exempt-interest income) would be
taxable as ordinary income, to the extent of such Portfolio's current and
accumulated earnings and profits and would be eligible for the dividends
received deduction in the case of corporate unitholders.
Unitholders will be advised annually as to the Federal income tax consequences
of distributions made by the Portfolios each year.
B-53
<PAGE>
The Code imposes a non-deductible 4% excise tax on regulated investment
companies that fail to currently distribute an amount equal to specified
percentages of their ordinary taxable income and capital gain net income (excess
of capital gains over capital losses). Each Portfolio intends to make
sufficient distributions or deemed distributions of its ordinary taxable income
and capital gain net income each calendar year to avoid liability for this
excise tax.
The Trust will be required in certain cases to withhold and remit to the United
States Treasury 31% of taxable dividends or 31% of gross sale proceeds paid to
any unitholder (i) who has provided either an incorrect tax identification
number or no number at all, (ii) who is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of taxable interest
or dividend income properly, or (iii) who has failed to certify to the Trust to
do so, that he is not subject to backup withholding or that he is an "exempt
recipient."
TAXATION OF CERTAIN FINANCIAL INSTRUMENTS
Special rules govern the Federal income tax treatment of financial instruments
that may be held by the Portfolios. These rules may have a particular impact on
the amount of income or gain that a Portfolio must distribute to its respective
unitholders to comply with the Distribution Requirement, on the income or gain
qualifying under the Income Requirement and on its ability to comply with the
Short-Short Test described above.
Generally, futures contracts, options on futures contracts and certain foreign
currency contracts held by a Portfolio (collectively, the "Instruments") at the
close of its taxable year are treated for Federal income tax purposes as sold
for their fair market value on the last business day of such year, a process
known as "mark-to-market." Forty percent of any gain or loss resulting from such
constructive sales will be treated as short-term capital gain or loss and 60% of
such gain or loss will be treated as long-term capital gain or loss without
regard to the period a Portfolio has held the Instruments ("the 40%-60% rule").
The amount of any capital gain or loss actually realized by a Portfolio in a
subsequent sale or other disposition of those Instruments is adjusted to reflect
any capital gain or loss taken into account by the Portfolio in a prior year as
a result of the constructive sale of the Instruments. Losses with respect to
futures contracts to sell related options and certain foreign currency
contracts, which are regarded as parts of a "mixed straddle" because their
values fluctuate inversely to the values of specific securities held by the
Portfolios, are subject to certain loss deferral rules which limit the amount of
loss currently deductible on either part of the straddle to the amount thereof
which exceeds the unrecognized gain (if any) with respect to the other part of
the straddle, and to certain wash sales
B-54
<PAGE>
regulations. Under short sales rules, which are also applicable, the holding
period of the securities forming part of the straddle will (if they have not
been held for the long-term holding period) be deemed not to begin prior to
termination of the straddle. With respect to certain Instruments, deductions
for interest and carrying charges may not be allowed. Notwithstanding the rules
described above, with respect to futures contracts which are part of a "mixed
straddle" to sell related options and certain foreign currency contracts which
are properly identified as such, a Portfolio may make an election which will
exempt (in whole or in part) those identified futures contracts, options and
foreign currency contracts from the rules of Section 1256 of the Code including
"the 40%-60% rule" and the mark-to-market on gains and losses being treated for
Federal income tax purposes as sold on the last business day of each Portfolio's
taxable year, but gains and losses will be subject to such short sales, wash
sales and loss deferral rules and the requirement to capitalize interest and
carrying charges. Under Temporary Regulations, each Portfolio would be allowed
(in lieu of the foregoing) to elect either (1) to offset gains or losses from
portions which are part of a mixed straddle by separately identifying each mixed
straddle to which such treatment applies, or (2) to establish a mixed straddle
account for which gains and losses would be recognized and offset on a periodic
basis during the taxable year. Under either election, "the 40%-60% rule" will
apply to the net gain or loss attributable to the Instruments, but in the case
of a mixed straddle account election, not more than 50% of any net gain may be
treated as long-term and no more than 40% of any net loss may be treated as
short-term.
A foreign currency contract must meet the following conditions in order to be
subject to the mark-to-market rules described above: (1) the contract must
require delivery of a foreign currency of a type in which regulated futures
contracts are traded or upon which the settlement value of the contract depends;
(2) the contract must be entered into at arm's length at a price determined by
reference to the price in the interbank market; and (3) the contract must be
traded in the interbank market. The Treasury Department has broad authority to
issue regulations under the provisions respecting foreign currency contracts.
As of the date of this Additional Statement, the Treasury Department has not
issued any such regulations. Other foreign currency contracts entered into by a
Portfolio may result in the creation of one or more straddles for Federal income
tax purposes, in which case certain loss deferral, short sales, and wash sales
rules and the requirement to capitalize interest and carrying charges may apply.
Some of the non-U.S. dollar denominated investments that the Portfolios may
make, such as foreign debt securities and foreign currency contracts, may be
subject to provisions of the Code which govern the Federal income tax treatment
of certain
B-55
<PAGE>
transactions denominated in terms of a currency other than the U.S. dollar or
determined by reference to the value of one or more currencies other than the
U.S. dollar. The types of transactions covered by these provisions include the
following: (1) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in Treasury
regulations, preferred stock); (2) the accruing of certain trade receivables and
payables; and (3) the entering into or acquisition of any forward contract,
futures contract, option and similar financial instrument. The disposition of a
currency other than the U.S. dollar by a U.S. taxpayer also is treated as a
transaction subject to the special currency rules. However, regulated futures
contracts and nonequity options are generally not subject to the special
currency rules if they are or would be treated as sold for their fair market
value at year-end under the mark-to-market rules, unless an election is made to
have such currency rules apply. With respect to transactions covered by the
special rules, foreign currency gain or loss is calculated separately from any
gain or loss on the underlying transaction and is normally taxable as ordinary
gain or loss. A taxpayer may elect to treat as capital gain or loss foreign
currency gain or loss arising from certain identified forward contracts, futures
contracts and options that are capital assets in the hands of the taxpayer and
which are not part of a straddle. In accordance with Treasury regulations,
certain transactions that are part of a "Section 988 hedging transaction" (as
defined in the Code and Treasury regulations) may be integrated and treated as a
single transaction or otherwise treated consistently for purposes of the Code.
"Section 988 hedging transactions" are not subject to the mark-to-market or loss
deferral rules under the Code. Gain or loss attributable to the foreign
currency component of transactions engaged in by the Portfolios which are not
subject to the special currency rules (such as foreign equity investments other
than certain preferred stocks) is treated as capital gain or loss and is not
segregated from the gain or loss on the underlying transaction.
FOREIGN INVESTORS
Foreign unitholders generally will be subject to U.S. withholding tax at a rate
of 30% (or a lower treaty rate, if applicable) on distributions by a Portfolio
of net interest income, other ordinary income, and the excess, if any, of net
short-term capital gain over net long-term capital loss for the year. For this
purpose, foreign unitholders include individuals other than U.S. citizens,
residents and certain nonresident aliens, and foreign corporations,
partnerships, trusts and estates. A foreign unitholder generally will not be
subject to U.S. income or withholding tax in respect of proceeds from or gain
on the redemption of units or in respect of capital gain dividends, provided
such unitholder submits a statement, signed under penalties of perjury,
attesting to such unitholder's exempt
B-56
<PAGE>
status. Different tax consequences apply to a foreign unitholder engaged in a
U.S. trade or business. Foreign unitholders should consult their tax advisers
regarding the U.S. and foreign tax consequences of investing in a Portfolio.
CONCLUSION
The foregoing discussion is based on Federal tax laws and regulations which are
in effect on the date of this Additional Statement. Such laws and regulations
may be changed by legislative or administrative action. No attempt is made to
present a detailed explanation of the tax treatment of the Portfolio or its
unitholders, and the discussion here and in the Prospectus is not intended as a
substitute for careful tax planning. Unitholders are advised to consult their
tax advisers with specific reference to their own tax situation, including the
application of state and local taxes.
Although each Portfolio expects to qualify as a "regulated investment company"
and to be relieved of all or substantially all Federal income taxes, depending
upon the extent of its activities in states and localities in which its offices
are maintained, in which its agents or independent contractors are located or in
which it is otherwise deemed to be conducting business, each Portfolio may be
subject to the tax laws of such states or localities.
DESCRIPTION OF UNITS
The Trust Agreement permits the Trust's Board of Trustees to issue an unlimited
number of full and fractional units of beneficial interest of one or more
separate series representing interests in one or more investment portfolios.
The Trust may hereafter create series in addition to the Trust's eighteen
existing series, which represent interests in the Trust's eighteen respective
portfolios, seven of which are described in this Additional Statement. The
Trust Agreement further permits the Board of Trustees to classify or reclassify
any unissued units into additional series or subseries within a series.
Pursuant to such authority, other than with respect to the Short Duration
Portfolio, the Trustees have authorized the issuance of an unlimited number of
units of beneficial interest in four separate subseries (sometimes referred to
as "classes") of units in each of its non-money market portfolios: Class A, B, C
and D units. Under the terms of the Trust Agreement, each unit of each Portfolio
is without par value, represents an equal proportionate interest in the
particular Portfolio with each other unit of its class in the same Portfolio and
is entitled to such dividends and distributions out of the income belonging to
the Portfolio as are declared by the Trustees. Upon any liquidation of a
Portfolio, unitholders of each class of a Portfolio are entitled to share
B-57
<PAGE>
pro rata in the net assets belonging to that class available for distribution.
Units do not have any preemptive or conversion rights. The right of redemption
is described under "Investing-Redemption of Units" in the Prospectus. In
addition, pursuant to the terms of the 1940 Act, the right of a unitholder to
redeem units and the date of payment by a Portfolio may be suspended for more
than seven days (a) for any period during which the New York Stock Exchange is
closed, other than the customary weekends or holidays, or trading in the markets
the Portfolio normally utilizes is closed or is restricted as determined by the
SEC, (b) during any emergency, as determined by the SEC, as a result of which it
is not reasonably practicable for the Portfolio to dispose of instruments owned
by it or fairly to determine the value of its net assets, or (c) for such other
period as the SEC may by order permit for the protection of the unitholders of
the Portfolio. The Trust may also suspend or postpone the recordation of the
transfer of its units upon the occurrence of any of the foregoing conditions.
In addition, units of each Portfolio are redeemable at the unilateral option of
the Trust if the Trustees determine in their sole discretion that failure to so
redeem may have material adverse consequences to the unitholders of the
Portfolio. Units when issued as described in the Prospectus are validly issued,
fully paid and nonassessable, except as stated below.
The proceeds received by each Portfolio for each issue or sale of its units, and
all net investment income, realized and unrealized gain and proceeds thereof,
subject only to the rights of creditors, will be specifically allocated to and
constitute the underlying assets of that Portfolio. The underlying assets of
each Portfolio will be segregated on the books of account, and will be charged
with the liabilities in respect to that Portfolio and with a share of the
general liabilities of the Trust. Expenses with respect to the Portfolios are
normally allocated in proportion to the net asset value of the respective
Portfolios except where allocations of direct expenses can otherwise be fairly
made.
Rule 18f-2 under the 1940 Act provides that any matter required by the
provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding units of
each investment portfolio affected by such matter. Rule 18f-2 further provides
that an investment portfolio shall be deemed to be affected by a matter unless
the interests of each investment portfolio in the matter are substantially
identical or the matter does not affect any interest of the investment
portfolio. Under the Rule, the approval of an investment advisory agreement or
any change in a fundamental investment policy would be effectively acted upon
with respect to an investment portfolio only if
B-58
<PAGE>
approved by a majority of the outstanding units of such investment portfolio.
However, the Rule also provides that the ratification of the appointment of
independent accountants, the approval of principal underwriting contracts and
the election of Trustees may be effectively acted upon by unitholders of the
Trust voting together in the aggregate without regard to a particular investment
portfolio. In addition, unitholders of each of the classes in a particular
investment portfolio have equal voting rights except that only units of a
particular class of an investment portfolio will be entitled to vote on matters
submitted to a vote of unitholders (if any) relating to unitholder servicing
expenses and transfer agency fees that are payable by that class.
As a general matter, the Trust does not hold annual or other meetings of
unitholders. This is because the Trust Agreement provides for unitholder voting
only for the election or removal of one or more Trustees, if a meeting is called
for that purpose, and for certain other designated matters. Each Trustee serves
until the next meeting of unitholders, if any, called for the purpose of
considering the election or reelection of such Trustee or of a successor to such
Trustee, and until the election and qualification of his successor, if any,
elected at such meeting, or until such Trustee sooner dies, resigns, retires or
is removed by the unitholders or two-thirds of the Trustees.
Under Massachusetts law, there is a possibility that unitholders of a business
trust could, under certain circumstances, be held personally liable as partners
for the obligations of the Trust. The Trust Agreement contains an express
disclaimer of unitholder (as well as Trustee and officer) liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each contract, undertaking or instrument entered into or executed by the Trust
or the Trustees. The Trust Agreement provides for indemnification out of Trust
property of any unitholder charged or held personally liable for the obligations
or liabilities of the Trust solely by reason of being or having been a
unitholder of the Trust and not because of such unitholder's acts or omissions
or for some other reason. The Trust Agreement also provides that the Trust
shall, upon proper and timely request, assume the defense of any charge made
against any unitholder as such for any obligation or liability of the Trust and
satisfy any judgment thereon. Thus, the risk of a unitholder incurring
financial loss on account of unitholder liability is limited to circumstances in
which the Trust itself would be unable to meet its obligations.
The Trust Agreement provides that each Trustee of the Trust will be liable for
his own wilful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee ("disabling
conduct"), and for nothing else, and will not be liable for errors of judgment
or
B-59
<PAGE>
mistakes of fact or law. The Trust Agreement provides further that the Trust
will indemnify Trustees and officers of the Trust against liabilities and
expenses incurred in connection with litigation and other proceedings in which
they may be involved (or with which they may be threatened) by reason of their
positions with the Trust, except that no Trustee or officer will be indemnified
against any liability to the Trust or its unitholders to which he would
otherwise be subject by reason of disabling conduct.
As of May 1, 1997 substantially all of the Portfolios' outstanding units were
held of record by Northern for the benefit of its customers and the customers of
its affiliates and correspondent banks that have invested in the Portfolios. As
of the same date, the Trust's Trustees and officers owned beneficially less than
1% of the outstanding units of each Portfolio. Northern has advised the Trust
that the following persons (whose mailing address is: c/o The Northern Trust
Company, 50 South LaSalle, Chicago, IL 60675) beneficially owned five percent or
more of the outstanding units of the following Portfolios as of May 1, 1997:
<TABLE>
<CAPTION>
Number Percentage
of Units of Units
-------- -----------
<S> <C> <C>
International Bond Porfolio
The Northern Trust Company Pension 833,589 59.40%
Plan
Doe Run Resources Corporation 174,923 12.46%
Retirement Plan
Peoples State Bank, St. Joseph, 108,324 7.73%
Michigan
U.S. Treasury Index Portfolio
Case Hourly Employee Pension Plan 612,173 40.51%
Liberty Healthcare System Inc. 208,861 13.82%
Pension Plan
Purina Mills Inc. Master Retirement 144,409 9.56%
Trust
Short Intermediate Bond Portfolio
Union Texas Petroleum Holdings Master 412,247 5.44%
Pension Trust
Midcon Corp. Master Welfare Benefit 402,743 5.31%
Taxable Funds Account
Rexene Corporation Savings Retirement 402,934 5.31%
Plan
</TABLE>
B-60
<PAGE>
<TABLE>
<S> <C> <C>
U.A. Local 398 Health & Welfare Trust 383,048 5.05%
Short Duration Portfolio
Schlumberger Limited Master Health
Care Medical Plan Trust 1,112,023 23.64%
Navistar International Corporation 867,574 18.44%
Retirement Health Benefits Trust
Schlumberger Limited Master Pension 483,382 10.28%
Trust
Case Hourly Employee Pension Plan 480,997 10.23%
Illinois Masonic Medical Center 440,368 9.36%
Restricted Investment Fund
Illinois Masonic Medical Center Board 307,625 6.54%
Designated Fund
Bond Fund Portfolio
The Northern Trust Company Pension 1,657,265 7.29%
Plan
Americlean Systems Inc. Salaried 1,314,731 5.78%
Pension Plan
The Northern Trust Company Thrift 1,307,885 5.75%
Incentive Plan
Phycor, Inc. Savings and Profit 2,298,333 10.11%
Sharing Plan
U.S. Government Securities Portfolio
Schlumberger Limited Master Profit 2,260,451 46.10%
Sharing Trust
Electrical Insurance Trust 637,426 10.96%
Supplemental Unemployment Benefit
Fund
Schlumberger Limited Master Pension 413,266 8.43%
Trust
Sheet Metal Workers Local 265 Health 375,829 7.66%
& Welfare Plan
</TABLE>
B-61
<PAGE>
OTHER INFORMATION
The Prospectus and this Additional Statement do not contain all the information
included in the Registration Statement filed with the SEC under the Securities
Act of 1933 with respect to the securities offered by the Trust's Prospectus.
Certain portions of the Registration Statement have been omitted from the
Prospectus and this Additional Statement pursuant to the rules and regulations
of the SEC. The Registration Statement including the exhibits filed therewith
may be examined at the office of the SEC in Washington, D.C.
Each Portfolio is responsible for the payment of its expenses. Such expenses
include, without limitation, the fees and expenses payable to Northern and
Goldman Sachs, brokerage fees and commissions, fees for the registration or
qualification of Portfolio units under Federal or state securities laws,
expenses of the organization of the Portfolio, taxes, interest, costs of
liability insurance, fidelity bonds, indemnification or contribution, any costs,
expenses or losses arising out of any liability of, or claim for damages or
other relief asserted against, the Trust for violation of any law, legal, tax
and auditing fees and expenses, Servicing Fees, expenses of preparing and
printing prospectuses, statements of additional information, proxy materials,
reports and notices and the printing and distributing of the same to the Trust's
unitholders and regulatory authorities, compensation and expenses of its
Trustees, expenses of industry organizations such as the Investment Company
Institute, miscellaneous expenses and extraordinary expenses incurred by the
Trust.
The term "majority of the outstanding units" of either the Trust or a particular
Portfolio means the vote of the lesser of (i) 67% or more of the units of the
Trust or such Portfolio present at a meeting, if the holders of more than 50% of
the outstanding units of the Trust or such Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding units of the Trust or such
Portfolio.
STATEMENTS CONTAINED IN THE PROSPECTUS OR IN THIS ADDITIONAL STATEMENT AS TO THE
CONTENTS OF ANY CONTRACT OR OTHER DOCUMENTS REFERRED TO ARE NOT NECESSARILY
COMPLETE, AND IN EACH INSTANCE REFERENCE IS MADE TO THE COPY OF SUCH CONTRACT OR
OTHER DOCUMENT FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THE
PROSPECTUS AND THIS ADDITIONAL STATEMENT FORM A PART, EACH SUCH STATEMENT BEING
QUALIFIED IN ALL RESPECTS BY SUCH REFERENCE.
B-62
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK BOND PORTFOLIO
Yields on securities with two- to 30-year maturities remained relatively
stable, moving only 0.20% to 0.30% higher from the beginning of the fiscal year
to the end. Nevertheless, the interest rate environment during the fiscal year
was volatile, as investors tried to anticipate Federal Reserve activity. Two-
year securities traversed a 1.64% range, and the 30-year Treasury moved in a
1.24% range. The Fed, however, remained on hold after adjusting policy on
January 31, 1996. In this uncertain interest rate environment, investors
continued to reach for yield in their search for incremental return. As a
result, the corporate and mortgage sectors outperformed Treasuries, with the
best performance coming from lower-quality issues.
Before fees, the portfolio provided a marginally higher return than its
benchmark index. The portfolio's interest rate posture was neutral to its
index, which neither added nor detracted from performance. The portfolio's
outperformance was generated through overweightings in non-Treasury sectors
and, in particular, through exposure to surplus notes and perpetual floating
rate notes.
Moving into 1997, we continue to hold a normal interest rate posture. The
current inflation rate continues to make yields attractive from an historical
real yield perspective, though the tight labor market gives us pause. If
meaningful progress is made toward balancing the budget and entitlement reform,
we may become more constructive on the market. While corporate spreads remain
tight by historical standards, we continue to find opportunity to add value and
remain overweighted in the corporate and mortgage sectors.
Mark Wirth, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK BOND
PORTFOLIO VS. THE LEHMAN BROTHERS
GOVERNMENT/CORPORATE BOND INDEX
-l- Bond Portfolio
- -c- - Lehman Brothers
Government/Corporate Bond Index
LOGO
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class A Corporate
November 30, 1996: Units Bond Index
- ---------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.57% 5.59%
- ---------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 8.26% 7.58%
- ---------------------------------------------------------------------------------------
</TABLE>
LOGO
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class C Corporate
November 30, 1996: Units Bond Index
- -----------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.33% 5.59%
- -----------------------------------------------------------------------------------------
Since Commencement on 7/3/95: 8.17% 7.55%
- -----------------------------------------------------------------------------------------
</TABLE>
LOGO
<TABLE>
<CAPTION>
Lehman Brothers
Average Annual Total Returns Government/
For Periods Ended Class D Corporate
November 30, 1996: Units Bond Index
- ---------------------------------------------------------------------------------------
<S> <C> <C>
One Year: 5.17% 5.59%
- ---------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 11.05% 10.02%
- ---------------------------------------------------------------------------------------
</TABLE>
Units of The Benchmark Funds are not bank deposits or obligations of, or
guaranteed, endorsed or otherwise supported by The Northern Trust Company, its
parent company or its affiliates, and are not federally insured or guaranteed
by the U.S. Government, Federal Deposit Insurance Corporation, Federal Reserve
Board, or any other governmental agency. Investment in the portfolios involves
investment risks, including possible loss of principal amount invested.
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK INTERNATIONAL BOND PORTFOLIO
Total return performance of most non-U.S. bond markets was excellent for the
fiscal year ended November 30, 1996. Economic growth in these countries turned
out to be slower than expected and, as a result, monetary policy remained loose
during the year. In addition inflation was cooperative as it actually declined
in many markets.
The portfolio significantly outperformed its benchmark during the period, due
primarily to its 10% underweighting in the Japanese bond and currency markets.
Of the non-U.S. bond markets, Japan performed the worst during the year, and
the yen fell nearly 11% in value versus the U.S. dollar.
Whenever the dollar increases in value versus other currencies, such as the
yen, the portfolio's nominal return is likely to suffer. However, because the
portfolio was significantly underweighted in Japan throughout the year, we were
able to avoid some of the currency effects caused by the stronger dollar and
weaker yen.
In addition to underweighting the Japanese market, another strategy that
contributed to the portfolio's relative performance was overweighting the
Canadian and Australian markets, both of which performed exceptionally well
compared to other countries.
We recently reduced the portfolio's underweight in Japan and its overweight
in U.S. dollars. Even though the yen may continue to fall further, going
forward, we don't believe it's prudent to take as strong a stand as we did over
the past 12 months. From an overall interest rate sensitivity standpoint, the
portfolio is positioned near neutral versus its benchmark.
Mike Lannan, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK INTERNATIONAL BOND PORTFOLIO VS. THE J.P.
MORGAN NON-U.S. GOVERNMENT BOND INDEX
l International Bond Portfolio
- -c- - J.P. Morgan Non-U.S.
Government Bond Index
LOGO
<TABLE>
<CAPTION>
J.P.
Morgan
Average Annual Total Returns Non-U.S.
For Periods Ended Class A Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 9.47% 7.13%
- -------------------------------------------------------------------------------------------
Since Commencement on 3/28/94: 11.72% 11.80%
</TABLE>
LOGO
<TABLE>
<CAPTION>
J.P.
Morgan
Average Annual Total Returns Non-U.S.
For Periods Ended Class D Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 9.04% 7.13%
- ------------------------------------------------------------------------------------------
Since Commencement on 11/20/95: 8.45% 6.02%
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK SHORT DURATION PORTFOLIO
The portfolio's composition did not change much during the fiscal year ended
November 30, 1996. We continued to invest primarily in asset-backed and other
floating-rate securities, two-year Treasuries and commercial notes. We tended
to favor securities from the bank and finance sectors, as they offered the most
attractive yields without sacrificing quality.
Compared to the three-month LIBOR Index and the 90-day Treasury Bill Index,
the portfolio performed relatively poorly from February through April. However,
during the final three months of the fiscal year, the portfolio recovered
nicely, with its yield surpassing both indices.
The portfolio's duration was approximately 100 days at the beginning of the
fiscal year, peaked at approximately 160 days in June and decreased to
approximately 80 days by year end, reflecting the more defensive nature of the
portfolio.
With the economy continuing to show some strength, future Federal Reserve
actions are uncertain. As such, we expect to maintain a more defensive
position. We feel that the portfolio remains an attractive alternative to money
market funds for those who want to keep their investments in a short-term
strategy for more than three to six months.
Jerry Pearson, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK SHORT
DURATION PORTFOLIO, THE LEHMAN
BROTHERS SHORT (1-3) INVESTMENT GRADE
DEBT INDEX AND THE 3 MONTH LIBOR
INDEX
-l- Short Duration Portfolio - -c- - Lehman Brothers Short (1-
3) Inv't. Grade Debt Index - - X - - 3 Month LIBOR Index
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns
For Periods Ended Class A Lehman 3 Month
November 30, 1996: Units Brothers LIBOR
<S> <C> <C> <C>
One Year: 5.45% 6.49% 5.60%
- -------------------------------------------------------------------------------------------
Since Commencement on 6/2/93: 4.84% 6.24% 4.94%
</TABLE>
3
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK SHORT-INTERMEDIATE BOND PORTFOLIO
Yields on securities with two- to five-year maturities remained relatively
stable, moving only 0.20% to 0.30% higher from the beginning of the fiscal year
to the end. Nevertheless, the interest rate environment during the fiscal year
was volatile, as investors tried to anticipate Federal Reserve activity. Two-
year securities traversed a 1.64% range, while five-year securities moved in a
1.72% range. The Fed, however, remained on hold after adjusting policy on
January 31, 1996. In this uncertain interest rate environment, investors
continued to reach for yield in their search for incremental return. As a
result, the corporate and mortgage sectors outperformed Treasuries, with the
best performance coming from lower-quality issues.
Before fees, the portfolio provided a marginally higher return than its
benchmark index. The portfolio's interest rate posture was neutral to its
index, which neither added nor detracted from performance. The portfolio's
outperformance was generated through overweightings in non-Treasury sectors.
Moving into 1997, we continue to hold a normal interest rate posture. The
current inflation rate continues to make yields attractive from an historical
real yield perspective, though the tight labor market gives us pause. If
meaningful progress is made toward balancing the budget and entitlement reform,
we may become more constructive on the market. While corporate spreads remain
tight by historical standards, we continue to find opportunity to add value and
remain overweighted in the corporate and mortgage sectors.
Mark Wirth, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK SHORT-
INTERMEDIATE BOND PORTFOLIO VS. THE
MERRILL LYNCH 1-5 CORPORATE/GOVERNMENT
INDEX
-l- Short-Intermediate Bond
Portfolio
- -c- - Merrill Lynch 1-5
Corporate/Government Index
LOGO
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total Returns 1-5 Corporate/
For Periods Ended Class A Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.68% 5.79%
- ------------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.10% 6.08%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Merrill Lynch
Average Annual Total Returns 1-5 Corporate/
For Periods Ended Class D Government
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.22% 5.79%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/14/94: 7.16% 7.72%
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE BENCHMARK U.S. GOVERNMENT SECURITIES PORTFOLIO
A static snapshot of the fiscal year would show short-term government bond
yields rising 0.25% higher during the year, on average. By most measures, this
movement would be considered modest. Nevertheless, this seeming stability does
not serve as an accurate portrayal of the volatility experienced. Two-year
Treasury bonds, for example, traded in a 1.75% range--from 4.75% to 6.50%--
during the fiscal year. Investors moved the market in this sideways fashion
based on ever-changing views of the future economic environment and its impact
on future interest rates. In general, the Federal Reserve was quiet during the
year, as it has not adjusted short-term rates since January 31, 1996.
As we have maintained since April 1996 (when two-year Treasury rates moved
above 6.00%), the current benign inflation outlook makes short-term interest
rates attractive from a "real" return standpoint for long-term investors. Thus,
the portfolio has been in a normal interest rate posture with respect to short-
term government bonds throughout the year, and it has correspondingly earned
market-type returns.
With the portfolio limited to investing in U.S. Treasury, government agency
and government agency mortgage-backed securities, we continually monitor the
agency/Treasury relative value trade-off. While government agency securities do
not typically compensate investors for the liquidity foregone relative to
Treasuries, we have found opportunities in mortgage securities to add
incremental yield with only a minimal level of call risk.
Steve Schafer, Portfolio Manager
COMPARISON OF CHANGE IN VALUE OF
$10,000 INVESTMENT IN BENCHMARK
U.S. GOVERNMENT SECURITIES PORTFOLIO
VS. THE MERRILL LYNCH 1-5 GOVERNMENT
INDEX
-l- U.S. Government
Securities Portfolio
- -c- - Merrill Lynch 1-5
Government Index
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class A 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
One Year: 5.15% 5.67%
- ------------------------------------------------------------------------------------------
Since Commencement on 4/5/93: 5.04% 5.57%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns** Merrill Lynch
For Period Ended Class C 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
Since Commencement on 12/29/95: 4.05% 4.76%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Merrill Lynch
For Periods Ended Class D 1-5 Government
November 30, 1996: Units Index
<S> <C> <C>
One Year: 4.77% 5.67%
- ------------------------------------------------------------------------------------------
Since Commencement on 9/15/94: 6.48% 7.53%
</TABLE>
**AVERAGE ANNUAL TOTAL RETURNS ARE NOT ANNUALIZED FOR PERIODS LESS THAN ONE
YEAR.
5
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF PORTFOLIO PERFORMANCE
THE BENCHMARK U.S. TREASURY INDEX PORTFOLIO
On average, Treasury yields remained relatively stable from the beginning of
the fiscal year to the end. In between, however, there was significant short-
term volatility, as the ever-changing views on where the economy was headed and
what impact that would have on future interest rates caused yields to go up and
down.
Yields on two-year Treasury bonds, for example, moved in a 1.75% range, while
yields on the 30-year Treasury bond moved in a 1.24% range during the year.
As it is designed to do, the U.S. Treasury Index Portfolio performed in line
with the Lehman Brothers U.S. Treasury Bond Index during the period from
December 1, 1995, to November 30, 1996. We will continue to invest in
securities represented by the Index in our effort to provide returns that
closely approximate those of the Index.
Richard Steck, Portfolio Manager
COMPARISON OF CHANGE IN VALUE
OF $10,000 INVESTMENT IN BENCHMARK U.S. TREASURY INDEX PORTFOLIO VS. THE LEHMAN
BROTHERS U.S. TREASURY BOND INDEX
-l- U.S. Treasury Index Portfolio
- -c- - Lehman Brothers U.S.
Treasury Bond Index
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Lehman Brothers
For Periods Ended Class A U.S. Treasury
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 5.10% 5.24%
- ----------------------------------------------------------------------------------------
Since Commencement on 1/11/93: 6.97% 7.24%
</TABLE>
LOGO
<TABLE>
<CAPTION>
Average Annual Total Returns Lehman Brothers
For Periods Ended Class D U.S. Treasury
November 30, 1996: Units Bond Index
<S> <C> <C>
One Year: 4.72% 5.24%
- -----------------------------------------------------------------------------------------
Since Commencement on 11/16/94: 10.40% 11.29%
</TABLE>
6
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- -----------------------------------------------
Principal Maturity
Amount Rate Date Value
- -----------------------------------------------
BOND PORTFOLIO
<C> <C> <S> <C>
ASSET-BACKED SECURITIES--0.2%
AUTOMOTIVE--0.2%
General Motors
Acceptance Corp.
Class A, Series:
1993-B
$ 827 4.000% 09/15/98 $ 819
HOME EQUITY LOANS--0.0%
U.S. Home Equity
Loan, Series: 1991-2
116 8.500 04/15/21 117
- -----------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $941) $ 936
- -----------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS--
12.3%
Countrywide Funding
Corp.
Class A4, Series:
1993-1
$13,567 5.321% 10/25/23 $ 12,244
Delta Funding Corp.,
Interest Only
Stripped Security,
Class A-4, Series:
1991-1*
-- -- 01/01/06 202
Donaldson, Lufkin &
Jenrette, Inc.
Mortgage Acceptance
Corp.,
Series 1994-Q8,
Class 2A1
5,752 7.250 05/25/24 5,752
Donaldson, Lufkin &
Jenrette, Inc.
Mortgage Acceptance
Corp.,
Adjustable Rate,
Interest Only
Stripped Security,
Series 1995-QE9*
-- -- 11/25/25 1,698
GE Capital Mortgage
Services Inc.
Class A-23, Series:
1994-10
13,850 6.500 03/25/24 12,160
PaineWebber Mortgage
Acceptance Corp.
Class A15, Series:
1993-9
7,919 7.000 10/25/23 7,848
Prudential Home
Mortgage Securities,
Adjustable Rate,
Interest Only
Stripped Security
Class A-17,
Series: 1993-36*
-- -- 10/25/23 2,972
Class A-18,
Series: 1994-8*
-- -- 03/25/24 1,123
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
Residential
Funding Mortgage
Securities,
Adjustable Rate,
Interest Only
Stripped Security
Class A-14,
Series: 1993-S22*
$ -- --% 06/25/23 $ 2,140
- -------------------------------------------------------
TOTAL COLLATERALIZED
MORTGAGE OBLIGATIONS (Cost
$46,317) $ 46,139
- -------------------------------------------------------
CORPORATE BONDS--10.9%
BROKERAGE SERVICES--2.5%
Salomon Brothers,
Inc.
$ 9,450 8.000% 03/28/97 $ 9,515
FINANCIAL--1.4%
General Motors
Acceptance Corp.
4,285 8.875 06/01/00 5,119
INSURANCE SERVICES--1.8%
Lumberman's
Mutual Casualty
Co.
6,000 9.150 07/01/26 6,717
RETAIL--2.1%
Penney (J.C.) &
Co., Inc.
7,700 6.900 08/15/03 7,939
SANITARY SERVICES--3.1%
WMX Technologies
11,000 7.100 08/01/03 11,604
- -------------------------------------------------------
TOTAL CORPORATE BONDS (Cost
$38,843) $ 40,894
- -------------------------------------------------------
U.S. GOVERNMENT AGENCIES--
21.9%
COLLATERALIZED MORTGAGE OBLIGA-
TIONS--15.7%
FEDERAL HOME LOAN MORTGAGE
CORP. MULTICLASS
INTEREST ONLY STRIPPED SE-
CURITY*--0.0%
Class 1392-S,
Series: 1392
$ -- --% 09/15/18 $ 37
FEDERAL HOME LOAN MORTGAGE
CORP. MULTICLASS
PRINCIPAL ONLY STRIPPED
SECURITIES*--4.2%
Class B, Series:
G011
$ 912 -- 04/25/23 632
Class D, Series:
1571
13,511 -- 08/15/23 8,525
Class PD, Series:
1750-C
10,054 -- 03/15/24 6,550
--------
15,707
</TABLE>
See accompanying notes to financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ----------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------
<C> <C> <S> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
REMIC TRUST--5.8%
Class 3-D, Series:
1990-3
$ 953 8.500% 07/25/18 $ 966
Class A, Series:
1996-M4
8,947 7.750 03/17/17 9,216
Class G, Series:
1992-73
7,500 7.500 04/25/21 7,660
Class SA, Series:
1991-127
660 12.661 09/25/98 671
Class SB, Series:
1994-59
6,364 2.880 03/25/24 3,304
--------
21,817
FEDERAL NATIONAL MORTGAGE
ASSOCIATION REMIC TRUST
INTEREST ONLY STRIPPED SE-
CURITY*--0.2%
Class S, Series:
G-12
-- -- 05/25/21 705
FEDERAL NATIONAL MORTGAGE
ASSOCIATION REMIC TRUST
PRINCIPAL ONLY STRIPPED SE-
CURITIES*--5.5%
Class B, Series:
1993-161
$ 4,732 -- 10/25/18 4,504
Class D, Series:
1993-132
1,947 -- 10/25/22 1,082
Class EA, Series:
1993-205
3,150 -- 09/25/23 2,165
Class G, Series:
1994-9
1,999 -- 11/25/23 1,870
Class L, Series:
1993-184
7,585 -- 09/25/23 4,982
Class PR, Series:
1996-14
9,000 -- 01/25/24 6,019
--------
20,622
MORTGAGE-BACKED SECURITIES--
6.2%
FEDERAL HOME LOAN MORTGAGE CORP.--
0.0%
1 6.500 06/01/04 1
GOVERNMENT NATIONAL MORTGAGE ASSOCIA-
TION--6.2%
7,615 8.000 11/15/26 7,852
Series: 2026
8,802 8.000 08/15/26 9,072
5,940 8.000 09/15/26 6,122
--------
23,046
- ----------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $76,677) $ 81,935
- ----------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- -------------------------------------------
Principal Maturity
Amount Rate Date Value
- -------------------------------------------
<C> <C> <S> <C> <C>
U.S. GOVERNMENT OBLIGATIONS--43.6%
U.S. TREASURY NOTES--41.4%
$12,310 6.750% 02/28/97 $ 12,352
25,000 5.875 10/31/98 25,125
13,600 6.750 05/31/99 13,942
38,745 6.875 08/31/99 39,901
14,000 7.750 01/31/00 14,807
8,450 5.750 08/15/03 8,363
37,000 7.500 02/15/05 40,486
--------
154,976
U.S. TREASURY BOND--2.2%
7,635 7.125 02/15/23 8,239
- -------------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $160,865) $163,215
- -------------------------------------------
FLOATING RATE BANK NOTES--
6.0%
Lloyds Bank PLC
$11,450 6.063% 12/13/96 $ 10,138
National
Westminster Bank
13,800 5.625 02/28/97 12,101
- -------------------------------------------
TOTAL FLOATING RATE BANK
NOTES
(Cost $21,480) $ 22,239
- -------------------------------------------
SHORT-TERM INVESTMENT--4.2%
Berliner Handels und
Frankfurter,
Grand Cayman
$15,853 5.688% 12/02/96 $ 15,853
- -------------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $15,853) $ 15,853
- -------------------------------------------
TOTAL INVESTMENTS--99.1%
(Cost $360,976) $371,211
- -------------------------------------------
Other assets, less
liabilities--0.9% 3,201
- -------------------------------------------
NET ASSETS--100.0% $374,412
- -------------------------------------------
- -------------------------------------------
</TABLE>
*At November 30, 1996, effective yields on these securities ranged from
approximately 5.00% to 15.00%. Refer to notes to statements of investments for
a discussion of stripped securities.
See accompanying notes to financial statements.
9
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO
<C> <C> <S> <C>
DEBT OBLIGATIONS--93.8%
AUSTRALIAN DOLLAR--4.3%
Commonwealth of
Australia
1,580 10.000% 10/15/02 $ 1,471
BELGIAN FRANC--1.9%
Kingdom of Belgium
18,275 7.500 07/29/08 641
BRITISH POUND STERLING--15.0%
Abbey National PLC
825 6.000 08/10/99 1,352
Lloyds Bank PLC
800 7.375 03/11/04 1,302
Treasury of United
Kingdom
1,420 8.000 06/10/03 2,490
-------
5,144
CANADIAN DOLLAR--8.4%
Dominion of Canada
1,075 7.500 12/01/03 880
Province of Ontario
1,050 7.250 09/27/05 826
Province of Quebec
1,325 10.250 10/15/01 1,187
-------
2,893
DANISH KRONE--5.5%
Kingdom of Denmark
10,100 8.000 03/15/06 1,872
FRENCH FRANC--8.9%
Electricite de
France
6,200 8.600 04/09/04 1,416
Republic of France
3,000 8.500 03/12/97 582
4,600 8.250 02/27/04 1,041
-------
3,039
GERMAN MARK--13.6%
Federal Republic of
Germany
1,795 6.250 01/04/24 1,117
LKB Global Bond
1,500 6.000 05/10/99 1,023
</TABLE>
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- ----------------------------------------------
<C> <C> <S> <C>
Republic of Austria
1,670 8.000% 01/30/02 $ 1,230
Republic of Finland
1,920 5.500 02/09/01 1,289
-------
4,659
ITALIAN LIRA--8.2%
Republic of Italy
4,000,000 8.500 04/01/04 2,808
JAPANESE YEN--13.5%
Asian Development
Bank
90,000 5.000 02/05/03 926
European Bank for
Reconstruction and
Development
95,000 5.875 11/26/99 953
International Bank
for
Reconstruction and
Development
100,000 4.500 03/20/03 1,010
Japan Development
Bank
160,000 6.500 09/20/01 1,721
-------
4,610
NETHERLANDS GUILDER--3.3%
Kingdom of the
Netherlands
1,675 8.500 03/15/01 1,118
SPANISH PESETA--4.1%
Kingdom of Spain
35,000 11.450 08/30/98 294
120,000 11.300 01/15/02 1,120
-------
1,414
SWEDISH KRONA--3.8%
Kingdom of Sweden
7,400 10.250 05/05/03 1,317
UNITED STATES DOLLAR--3.3%
U.S. Treasury Note
1,000 7.875 11/15/04 1,117
- ----------------------------------------------
TOTAL DEBT OBLIGATIONS
(Cost $29,495) $32,103
- ----------------------------------------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- -----------------------------------------------------------
Local Currency Maturity
Principal Amount Rate Date Value
- -----------------------------------------------------------
INTERNATIONAL BOND PORTFOLIO--CONTINUED
<C> <C> <S> <C>
SHORT-TERM INVESTMENT--2.6%
UNITED STATES DOLLAR
Berliner Handels und
Frankfurter,
Grand Cayman
$ 895 5.688% 12/02/96 $ 895
- -----------------------------------------------------------
TOTAL SHORT-TERM INVESTMENT (Cost
$895) $ 895
- -----------------------------------------------------------
TOTAL INVESTMENTS--96.4%
(Cost $30,390) $32,998
- -----------------------------------------------------------
Other assets, less liabilities--
3.6% 1,237
- -----------------------------------------------------------
NET ASSETS--100.0% $34,235
- -----------------------------------------------------------
- -----------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
<C> <C> <S> <C> <C> <C> <C> <C>
SHORT DURATION PORTFOLIO
ASSET-BACKED SECURITY--5.6%
Household Consumer
Loan Trust
Series: 96-2A
$ 2,324 5.545% 08/15/06 $ 2,324
- ------------------------------------------------------
TOTAL ASSET-BACKED SECURITY
(Cost $2,324) $ 2,324
- ------------------------------------------------------
FLOATING RATE NOTES--15.5%
Beneficial Corp.
$ 2,500 5.570% 11/04/99 $ 2,489
Household Finance
Co.
2,500 5.681 11/01/01 2,495
USL Capital Corp.
Series D
1,500 5.705 04/19/99 1,497
- ------------------------------------------------------
TOTAL FLOATING RATE NOTES
(Cost $6,499) $ 6,481
- ------------------------------------------------------
U.S. GOVERNMENT OBLIGATION--6.0%
U.S. Treasury Note
$ 2,500 5.733% 11/15/99 $ 2,512
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATION
(Cost $2,511) $ 2,512
- ------------------------------------------------------
COMMERCIAL PAPER--35.6%
ASSET-BACKED SECURITIES--13.5%
Ascot Capital
Corp.
$ 1,000 5.391% 02/10/97 $ 989
Cooperative
Association of
Tractor Dealers
500 5.376 12/10/96 499
Corporate
Receivables Corp.
400 5.317 12/09/96 399
Gotham Funding
Corp.
1,000 5.444 02/05/97 990
Old Line Funding
785 5.373 12/12/96 784
Strategic Asset
Funding Corp.
1,000 5.476 01/31/97 991
Wood Street
Funding Corp.
1,000 5.371 12/10/96 999
-------
5,651
COMMUNICATIONS--2.3%
NYNEX Corp.
1,000 5.375 12/16/96 998
</TABLE>
<TABLE>
<CAPTION>
Description
- --------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------
<C> <C> <S> <C> <C> <C> <C>
FOOD AND KINDRED PRODUCTS--
4.8%
Coca-Cola
Enterprises Inc.
$ 1,000 5.466% 12/05/96 $ 999
Thames Asset
Global
Securitization No.
1, Inc.
1,000 5.427 02/18/97 988
-------
1,987
HOLDING AND OTHER INVESTMENT
OFFICES--4.2%
CSW Credit, Inc.
900 5.309 12/04/96 899
400 5.314 12/10/96 399
Enterprise Funding
Corp.
466 5.354 12/13/96 465
-------
1,763
INSURANCE CARRIERS--4.8%
John Hancock
Capital Corp.
2,000 5.291 12/10/96 1,997
MISCELLANEOUS RETAIL--1.0%
Mont Blanc Capital
423 5.366 12/04/96 423
NONDEPOSITORY BUSINESS
CREDIT INSTITUTIONS--2.6%
PHH Corp.
1,000 5.327 12/16/96 999
Transamerica Corp.
100 5.261 12/05/96 100
-------
1,099
TRANSPORTATION--2.4%
General Motors
Acceptance Corp.
1,000 5.747 03/11/97 984
- --------------------------------------------------
TOTAL COMMERCIAL PAPER
(Cost $14,902) $14,902
- --------------------------------------------------
SHORT-TERM INVESTMENTS--15.6%
Federal Home Loan
Mortgage
Association
$ 4,525 5.703% 12/02/96 $ 4,524
Norinchukin Bank
1,000 5.340 12/06/96 1,000
Swiss Bank
1,000 5.520 12/18/96 1,000
- --------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(Cost $6,524) $ 6,524
- --------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS--23.9%
Bear Stearns & Co., Inc., Dated 11/29/96,
Repurchase Price $10,005
(U.S. Government Securities Colld.)
$10,000 5.680% 12/02/96 $10,000
Donaldson Lufkin & Jenrette Securities, Inc.,
Dated 11/29/96, Repurchase Price $3
(U.S. Government Securities Colld.)
3 5.920% 12/02/96 3
- --------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $10,003) $10,003
- --------------------------------------------------------------------
TOTAL INVESTMENTS--102.2%
(Cost $42,763) $42,746
- --------------------------------------------------------------------
Liabilities, less other assets--(2.2)% (933)
- --------------------------------------------------------------------
NET ASSETS--100.0% $41,813
- --------------------------------------------------------------------
- --------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- --------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- --------------------------------------------------------
SHORT-INTERMEDIATE BOND PORTFOLIO
ASSET-BACKED SECURITIES--8.2%
AUTOMOTIVE--8.2%
<C> <C> <S> <C>
Olympic Automobile
Receivables Trust
$4,000 5.950% 11/15/99 $4,017
2,627 7.875 07/15/01 2,693
Olympic Automobile
Receivables Trust,
Interest Only
Stripped Security*
-- -- 01/15/99 1,703
Premier Auto Trust
2,222 4.750 02/02/00 2,209
Western Financial
Automobile Loan
Trust
507 4.700 01/01/98 507
1,505 7.100 01/01/00 1,526
- --------------------------------------------------------
TOTAL ASSET-BACKED SECURI-
TIES
(Cost $12,880) $12,655
- --------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATION--1.6%
Donaldson, Lufkin
& Jenrette, Inc.
Mortgage
Acceptance Corp.,
Series 1994-Q8,
Class 2A1
$2,473 7.250% 05/25/24 $ 2,473
- --------------------------------------------------------
TOTAL COLLATERALIZED MORT-
GAGE
OBLIGATION (Cost $2,429) $ 2,473
- --------------------------------------------------------
CORPORATE OBLIGATIONS--9.7%
BROKERAGE SERVICES--7.4%
Donaldson Lufkin &
Jenrette, Inc.
Medium Term Note
$6,500 5.625% 02/15/16 $ 6,353
Salomon Brothers,
Inc. Medium Term
Notes
3,000 5.500 01/31/98 2,987
2,000 5.700 02/11/98 1,995
-------
11,335
FINANCIAL--2.3%
Greyhound
Financial Corp.
3,590 8.250 03/11/97 3,613
- --------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $15,075) $14,948
- --------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ---------------------------------------
Principal Maturity
Amount Rate Date Value
- ---------------------------------------
<C> <C> <S> <C>
U.S. GOVERNMENT AGENCIES--
9.2%
COLLATERALIZED MORTGAGE OBLIGATIONS
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION
REMIC TRUST PRINCIPAL ON-
LY*--3.3%
Class
BA, Series: 1571
$ 5,472 -- % 04/15/19 $ 5,098
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
REMIC TRUST--4.0%
Class
A, Series: 1996-M4
5,965 7.750 03/17/17 6,144
FEDERAL NATIONAL MORTGAGE
ASSOCIATION
REMIC TRUST PRINCIPAL ON-
LY*--1.9%
Class B, Series:
1993-161
1,183 -- 10/25/18 1,126
Class G, Series:
1994-9
1,999 -- 11/25/23 1,870
--------
2,996
- ---------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $12,738) $ 14,238
- ---------------------------------------
U.S. GOVERNMENT OBLIGA-
TIONS--67.1%
U.S. TREASURY NOTES--67.1%
$ 5,000 5.375% 11/30/97 $ 4,996
7,000 5.625 01/31/98 7,010
12,000 5.125 03/31/98 11,942
8,000 5.375 05/31/98 7,983
2,000 5.125 11/30/98 1,982
26,600 6.750 05/31/99 27,269
13,675 6.875 08/31/99 14,083
18,000 7.750 01/31/00 19,038
4,000 5.500 12/31/00 3,958
4,890 6.625 06/30/01 5,046
- ---------------------------------------
TOTAL U.S. GOVERNMENT OBLI-
GATIONS
(Cost $102,332) $103,307
- ---------------------------------------
SHORT-TERM INVESTMENT--2.3%
Berliner Handels
und Frankfurter,
Grand Cayman
$ 3,537 5.688% 12/02/96 $ 3,537
- ---------------------------------------
TOTAL SHORT-TERM INVESTMENT
(Cost $3,537) $ 3,537
- ---------------------------------------
TOTAL INVESTMENTS--98.1%
(Cost $148,991) $151,158
- ---------------------------------------
Other assets, less other
liabilities--1.9% 2,860
- ---------------------------------------
NET ASSETS--100.0% $154,018
- ---------------------------------------
- ---------------------------------------
</TABLE>
*At November 30, 1996, the effective yields on these securities ranged from
approximately 5.00% to 7.00%. Refer to notes to statements of investments for a
discussion of stripped securities.
See accompanying notes to financial statements.
14
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Description
- ----------------------------------------------
Principal Maturity
Amount Rate Date Value
- ----------------------------------------------
U.S. GOVERNMENT SECURITIES PORTFOLIO
U.S. GOVERNMENT AGENCIES--25.0%
COLLATERALIZED MORTGAGE OBLIGATIONS--15.0%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.8%
<C> <C> <S> <C>
Class F, Series:
1520
$ 750 5.650% 09/15/04 $ 745
FEDERAL NATIONAL MORTGAGE ASSOCIATION--14.2%
Class A, Series:
1996-M4
3,977 7.750 03/17/17 4,096
Class E, Series:
1992-200
1,000 6.250 06/25/17 1,000
Class EZ, Series:
1993-133
3,626 5.850 02/25/17 3,574
Class PD, Series:
1993-085
4,700 5.500 07/25/03 4,678
Class 14-F,
Series: 1988-14
297 9.200 12/25/17 308
-------
13,656
MORTGAGE-BACKED SECURITIES--7.9%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.6%
594 7.599 11/01/24 605
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--7.3%
6,632 8.000 08/15/26 6,835
179 8.000 11/15/26 184
-------
7,019
AGENCY OBLIGATIONS--2.1%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.5%
500 7.130 06/30/05 505
TENNESSEE VALLEY AUTHORITY NOTE--1.6%
1,500 6.235 07/15/45 1,524
-------
2,029
- ----------------------------------------------
TOTAL U.S. GOVERNMENT AGEN-
CIES
(Cost $23,881) $24,054
- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS--72.3%
U.S. TREASURY NOTES
<C> <C> <S> <C>
$15,000 6.750% 02/28/97 $15,051
18,000 5.500 11/15/98 17,966
7,500 6.750 05/31/99 7,689
15,000 7.750 01/31/00 15,865
12,000 6.125 07/31/00 12,141
715 6.625 06/30/01 738
- ------------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $69,274) $69,450
- ------------------------------------------------------
SHORT TERM INVESTMENT--1.3%
Federal Home Loan Bank
Discount Note
$ 1,225 5.700% 12/02/96 $ 1,225
- ------------------------------------------------------
TOTAL SHORT TERM INVESTMENT
(Cost $1,225) $ 1,225
- ------------------------------------------------------
TOTAL INVESTMENTS--98.6%
(Cost $94,380) $94,729
- ------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Other assets, less liabilities--1.4% 1,382
- ------------------------------------------------------------------------------
NET ASSETS--100.0% $96,111
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF INVESTMENTS
November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
Description
- ------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------
U.S. TREASURY INDEX PORTFOLIO
<C> <C> <S> <C>
U.S. GOVERNMENT OBLIGA-
TIONS--97.4%
U.S. TREASURY NOTES--63.7%
$1,500 5.500% 07/31/97 $ 1,502
1,115 9.250 08/15/98 1,181
6,100 5.000 01/31/99 6,024
1,400 5.500 02/28/99 1,396
2,350 7.875 11/15/99 2,487
2,900 6.375 01/15/00 2,954
1,700 6.250 02/15/03 1,730
-------
17,274
U.S. TREASURY BONDS--32.0%
435 13.875 05/15/11 673
660 14.000 11/15/11 1,040
490 13.250 05/15/14 781
1,000 7.250 05/15/16 1,089
900 8.125 05/15/21 1,078
1,100 6.250 08/15/23 1,067
2,800 6.875 08/15/25 2,954
-------
8,682
U.S. TREASURY INTEREST ONLY
STRIPPED SECURITY*--1.7%
475 -- 08/15/97 458
- ------------------------------------
TOTAL U.S. GOVERNMENT OB-
LIGATIONS
(Cost $25,857) $26,414
- ------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Description
- ------------------------------------
Principal Maturity
Amount Rate Date Value
- ------------------------------------
<C> <C> <S> <C>
SHORT TERM INVESTMENT--1.1%
Federal Home
Loan Bank
Discount Note
$ 310 5.700% 12/02/96 $ 310
- ------------------------------------
TOTAL SHORT TERM INVEST-
MENT
(Cost $310) $ 310
- ------------------------------------
TOTAL INVESTMENTS--98.5%
(Cost $26,167) $26,724
- ------------------------------------
Other assets, less liabil-
ities--1.5% 397
- ------------------------------------
NET ASSETS--100.0% $27,121
- ------------------------------------
- ------------------------------------
</TABLE>
*The effective yield on this Interest Only Stripped Security was 5.44% at
November 30, 1996. Refer to notes to statements of investments for a discussion
of stripped securities.
See accompanying notes to financial statements.
16
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO STATEMENTS OF INVESTMENTS
November 30, 1996
- --The percentage shown for each investment category reflects the value of
investments in that category as a percentage of net assets.
- --Interest rates represent either the stated coupon rate, annualized yield on
date of purchase for discounted notes or, for floating rate securities, the
current reset rate.
- --Stripped securities represent the right to receive either future interest
payments (interest only stripped securities) or principal payments (principal
only stripped securities). The value of variable rate interest only stripped
securities varies directly with changes in interest rates, while the value of
fixed rate interest only stripped securities and the value of principal only
stripped securities varies inversely with changes in interest rates.
17
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1996
(All amounts in thousands, except net asset value per unit)
<TABLE>
<CAPTION>
Short- U.S. U.S.
International Short Intermediate Government Treasury
Bond Bond Duration Bond Securities Index
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securi-
ties, at cost $360,976 $30,390 $32,760 $148,991 $94,380 $26,167
Repurchase agreements,
at cost -- -- 10,003 -- -- --
- ----------------------------------------------------------------------------------------------
Investments in securi-
ties, at value $371,211 $32,998 $32,743 $151,158 $94,729 $26,724
Repurchase agreements,
at value -- -- 10,003 -- -- --
Cash 196 141 -- 1,301 7 6
Receivables:
Interest 5,134 1,078 74 1,589 1,387 381
Foreign tax reclaims -- 17 -- -- -- --
Fund units sold 3 -- -- 36 -- --
Administrator 11 5 14 8 6 6
Deferred organization
costs, net 15 37 29 15 18 15
Other assets -- 2 2 -- -- --
- ----------------------------------------------------------------------------------------------
TOTAL ASSETS 376,570 34,278 42,865 154,107 96,147 27,132
- ----------------------------------------------------------------------------------------------
LIABILITIES:
Payable for:
Fund units redeemed 2,027 -- 1,000 30 -- --
Distributions to
unitholders -- -- 25 -- -- --
Accrued expenses:
Advisory fees 76 20 7 32 20 3
Administration fees 30 3 11 13 8 2
Custodian fees 4 5 4 2 2 2
Transfer agent fees 4 -- -- 1 1 --
Other liabilities 17 15 5 11 5 4
- ----------------------------------------------------------------------------------------------
TOTAL LIABILITIES 2,158 43 1,052 89 36 11
- ----------------------------------------------------------------------------------------------
NET ASSETS $374,412 $34,235 $41,813 $154,018 $96,111 $27,121
- ----------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS:
Paid-in capital $366,616 $31,072 $42,377 $151,156 $95,994 $27,538
Accumulated undistrib-
uted net investment in-
come -- 31 35 45 75 25
Accumulated net realized
gain (loss) on
investments (2,439) 529 (582) 650 (307) (999)
Net unrealized apprecia-
tion (depreciation) on
investments 10,235 2,608 (17) 2,167 349 557
Net unrealized loss on
translation of other
assets and liabilities
denominated in foreign
currencies -- (5) -- -- -- --
- ----------------------------------------------------------------------------------------------
NET ASSETS $374,412 $34,235 $41,813 $154,018 $96,111 $27,121
- ----------------------------------------------------------------------------------------------
Total units outstanding
(no par value), unlim-
ited units authorized
Class A 17,661 1,543 4,187 7,423 4,602 1,276
Class C 353 -- -- -- 176 --
Class D 11 2 -- 17 11 41
- ----------------------------------------------------------------------------------------------
Net asset value, offer-
ing and redemption price
per unit
Class A $ 20.77 $ 22.16 $ 9.99 $ 20.70 $ 20.07 $ 20.60
Class C $ 20.78 -- -- -- $ 20.06 --
Class D $ 20.76 $ 22.14 -- $ 20.66 $ 20.03 $ 20.57
- ----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
For the Year Ended November 30, 1996
(All amounts in thousands)
<TABLE>
<CAPTION>
SHORT- U.S. U.S.
INTERNATIONAL SHORT INTERMEDIATE GOVERNMENT TREASURY
BOND BOND DURATION BOND SECURITIES INDEX
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME: $22,432 $2,199(a) $2,692 $10,435 $4,897 $1,082
- ---------------------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees 1,993 288 194 1,011 527 70
Administration fees 575 80 121 353 220 44
Custodian fees 46 67 32 28 20 20
Transfer agent fees 38 3 -- 17 12 2
Registration fees 33 42 8 25 22 20
Professional fees 19 5 6 11 4 4
Trustee fees 12 2 2 7 2 2
Amortization of deferred
organization costs, net 14 17 20 14 13 13
Unitholder Servicing
Fees 7 -- -- -- 5 1
Other 19 2 12 12 8 8
- ---------------------------------------------------------------------------------------------
TOTAL EXPENSES 2,756 506 395 1,478 833 184
Less voluntary waivers
of:
Investment advisory
fees (1,163) (64) (121) (590) (307) (44)
Administration fees (243) (48) -- (184) (132) (26)
Less: Expenses reimburs-
able by Administrator (143) (87) (153) (97) (69) (67)
- ---------------------------------------------------------------------------------------------
Net expenses 1,207 307 121 607 325 47
- ---------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 21,225 1,892 2,571 9,828 4,572 1,035
Net realized gains
(losses) on:
Investment transactions 2,094 1,011 29 392 (58) 91
Foreign currency trans-
actions -- (35) -- -- -- --
Net change in unrealized
appreciation
(depreciation) on in-
vestments (3,905) 20 -- (1,308) (201) (239)
Net change in unrealized
gains on translation of
other assets and lia-
bilities denominated in
foreign currencies -- 6 -- -- -- --
- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET AS-
SETS RESULTING FROM
OPERATIONS $19,414 $2,894 $2,600 $ 8,912 $4,313 $ 887
- ---------------------------------------------------------------------------------------------
</TABLE>
(a) Net of $49 in non-reclaimable foreign withholding taxes.
See accompanying notes to financial statements.
19
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
For the Years Ended November 30, 1996 and 1995
(All amounts in thousands)
<TABLE>
<CAPTION>
Bond International
Portfolio Bond Portfolio
------------------ ----------------
1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 21,225 $ 15,744 $ 1,892 $ 1,898
Net realized gains (losses) on invest-
ments and foreign currency transactions 2,094 1,622 976 731
Net change in unrealized appreciation
(depreciation) on investments (3,905) 34,676 20 2,711
Net change in unrealized gains (losses)
on translations of other assets and li-
abilities denominated in foreign cur-
rencies -- -- 6 (11)
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 19,414 52,042 2,894 5,329
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS A UNITHOLDERS
FROM:
Net investment income (20,213) (15,211) (2,300) (2,605)
Return of capital (556) (347) -- --
- --------------------------------------------------------------------------------
Total distributions to Class A
unitholders (20,769) (15,558) (2,300) (2,605)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS C UNITHOLDERS
FROM:
Net investment income (264) (82) -- --
Return of capital (7) (2) -- --
- --------------------------------------------------------------------------------
Total distributions to Class C
unitholders (271) (84) -- --
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO CLASS D UNITHOLDERS
FROM:
Net investment income (8) (4) (1) --
Return of capital (1) -- -- --
- --------------------------------------------------------------------------------
Total distributions to Class D
unitholders (9) (4) (1) --
- --------------------------------------------------------------------------------
CLASS A UNIT TRANSACTIONS:
Proceeds from the sale of units 143,593 65,433 5,918 6,142
Reinvested distributions 18,565 13,688 1,747 2,073
Cost of units redeemed (79,885) (86,462) (6,747) (5,213)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets re-
sulting from Class A unit transactions 82,273 (7,341) 918 3,002
- --------------------------------------------------------------------------------
CLASS C UNIT TRANSACTIONS:
Proceeds from the sale of units 4,311 4,059 -- --
Reinvested distributions 271 84 -- --
Cost of units redeemed (1,032) (574) -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class C unit transactions 3,550 3,569 -- --
- --------------------------------------------------------------------------------
CLASS D UNIT TRANSACTIONS:
Proceeds from the sale of units 127 100 41 9
Reinvested distributions 9 4 1 --
Cost of units redeemed (37) (9) -- --
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
Class D unit transactions 99 95 42 9
- --------------------------------------------------------------------------------
Net increase (decrease) 84,287 32,719 1,553 5,735
Net assets--beginning of year 290,125 257,406 32,682 26,947
- --------------------------------------------------------------------------------
NET ASSETS--END OF YEAR $374,412 $290,125 $34,235 $32,682
- --------------------------------------------------------------------------------
UNDISTRIBUTED NET INVESTMENT INCOME: $ -- $ -- $ 31 $ 36
- --------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Short-
Short Duration Intermediate U.S. Government U.S. Treasury
Portfolio Bond Portfolio Securities Portfolio Index Portfolio
- ----------------- ------------------ ---------------------- ----------------
1996 1995 1996 1995 1996 1995 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 2,571 $ 4,196 $ 9,828 $ 6,272 $ 4,572 $ 1,688 $ 1,035 $ 1,675
29 (41) 392 735 (58) 60 91 823
-- 161 (1,308) 6,055 (201) 1,548 (239) 3,234
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
2,600 4,316 8,912 13,062 4,313 3,296 887 5,732
- --------------------------------------------------------------------------------
(2,571) (4,196) (9,596) (6,177) (4,393) (1,644) (1,005) (1,700)
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
(2,571) (4,196) (9,596) (6,177) (4,393) (1,644) (1,005) (1,700)
- --------------------------------------------------------------------------------
-- -- -- -- (159) -- -- --
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
-- -- -- -- (159) -- -- --
- --------------------------------------------------------------------------------
-- -- (3) (1) (9) (2) (26) (4)
-- -- -- -- -- -- -- --
- --------------------------------------------------------------------------------
-- -- (3) (1) (9) (2) (26) (4)
- --------------------------------------------------------------------------------
64,087 48,728 69,730 84,233 104,606 58,790 13,176 14,609
2,425 3,722 8,697 5,697 4,198 1,508 746 1,392
(70,201) (96,900) (82,742) (34,345) (72,555) (30,910) (5,169) (39,656)
- --------------------------------------------------------------------------------
(3,689) (44,450) (4,315) 55,585 36,249 29,388 8,753 (23,655)
- --------------------------------------------------------------------------------
-- -- -- -- 4,695 -- -- --
-- -- -- -- 159 -- -- --
-- -- -- -- (1,298) -- -- --
- --------------------------------------------------------------------------------
-- -- -- -- 3,556 -- -- --
- --------------------------------------------------------------------------------
-- -- 328 12 210 55 592 281
-- -- 3 -- 8 2 26 4
-- -- (2) -- (60) (5) (66) (3)
- --------------------------------------------------------------------------------
-- -- 329 12 158 52 552 282
- --------------------------------------------------------------------------------
(3,660) (44,330) (4,673) 62,481 39,715 31,090 9,161 (19,345)
45,473 89,803 158,691 96,210 56,396 25,306 17,960 37,305
- --------------------------------------------------------------------------------
$41,813 $45,473 $154,018 $158,691 $ 96,111 $ 56,396 $27,121 $17,960
- --------------------------------------------------------------------------------
$ 35 $ 35 $ 45 $ 206 $ 75 $ 75 $ 25 $ 21
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Bond Portfolio
------------------------------------------------------------------------------------
Class A Class C Class D
--------------------------------------- ---------------- --------------------------
1996 1995 1994 1993 (A) 1996 1995 (B) 1996 1995 1994 (C)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.96 $ 18.29 $ 20.70 $ 20.00 $20.96 $20.21 $ 20.94 $ 18.29 $18.74
Income (loss) from in-
vestment operations:
Net investment income 1.29 1.17 1.42 1.42 1.25 0.47 1.22 1.08 0.28
Net realized and
unrealized gain (loss)
on investments (0.19) 2.66 (2.21) 0.66 (0.18) 0.74 (0.18) 2.66 (0.45)
- ---------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment
operations 1.10 3.83 (0.79) 2.08 1.07 1.21 1.04 3.74 (0.17)
- ---------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.26) (1.14) (1.46) (1.38) (1.22) (0.45) (1.19) (1.09) (0.28)
Net realized gain on
investments -- -- (0.15) -- -- -- -- -- --
Return of capital (.03) (0.02) (0.01) -- (.03) (0.01) (.03) -- --
- ---------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.29) (1.16) (1.62) (1.38) (1.25) (0.46) (1.22) (1.09) (0.28)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) (0.19) 2.67 (2.41) 0.70 (0.18) 0.75 (0.18) 2.65 (0.45)
- ---------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.77 $ 20.96 $ 18.29 $ 20.70 $20.78 $20.96 $ 20.76 $ 20.94 $18.29
- ---------------------------------------------------------------------------------------------------------------
Total return (d) 5.57% 21.55% (4.04)% 10.60% 5.33% 6.08% 5.17% 21.06% (0.94)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and
reimbursements 0.36% 0.36% 0.36% 0.36% 0.60% 0.60% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and
reimbursements 0.84% 0.84% 0.87% 0.92% 1.08% 1.08% 1.23% 1.23% 1.26%
Net investment income,
net of waivers and re-
imbursements 6.39% 5.94% 7.31% 7.84% 6.09% 5.59% 5.99% 5.48% 6.31%
Net investment income,
before waivers and re-
imbursements 5.91% 5.46% 6.80% 7.28% 5.61% 5.11% 5.51% 5.00% 5.80%
Portfolio turnover rate 101.38% 74.19% 103.09% 89.06% 101.38% 74.19% 101.38% 74.19% 103.09%
Net assets at end of pe-
riod (in
thousands) $366,850 $286,301 $257,391 $245,112 $7,342 $3,704 $ 220 $ 120 $ 15
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class C units were issued on July 3, 1995.
(c) Class D units were issued on September 14, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
22
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Bond Portfolio Short Duration Portfolio
-------------------------------------------- -------------------------------------
Class A Class D Class A
-------------------------- ---------------- -------------------------------------
1996 1995 1994 (A) 1996 1995 (B) 1996 1995 1994 1993 (C)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 21.74 $ 19.93 $ 20.00 $21.74 $22.17 $ 9.99 $ 9.97 $ 10.03 $ 10.00
Income (loss) from
investment operations:
Net investment income 1.54 1.26 0.79 1.37 0.02 0.53 0.59 0.40 0.14
Net realized and
unrealized gain (loss)
on investments and
foreign currency
transactions 0.43 2.28 0.01 0.51 (0.08) -- 0.01 (0.05) 0.03
- --------------------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.97 3.54 0.80 1.88 (0.06) 0.53 0.60 0.35 0.17
- --------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income
(d) (1.55) (1.73) (0.87) (1.48) (0.37) (0.53) (0.58) (0.40) (0.14)
Net realized gain on
investments
transactions -- -- -- -- -- -- -- (0.01) --
- --------------------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.55) (1.73) (0.87) (1.48) (0.37) (0.53) (0.58) (0.41) (0.14)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) 0.42 1.81 (0.07) 0.40 (0.43) -- 0.02 (0.06) 0.03
- --------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 22.16 $ 21.74 $ 19.93 $22.14 $21.74 $ 9.99 $ 9.99 $ 9.97 $ 10.03
- --------------------------------------------------------------------------------------------------------------
Total return (e) 9.47% 18.20% 4.03% 9.04% (0.30)% 5.45% 6.14% 3.64% 1.73%
Ratio to average net as-
sets of (f):
Expenses, net of
waivers and
reimbursements 0.96% 0.96% 0.96% 1.35% 1.35% 0.25% 0.25% 0.25% 0.32%
Expenses, before
waivers and
reimbursements 1.58% 1.47% 1.49% 1.97% 1.86% 0.81% 0.80% 0.77% 0.50%
Net investment income,
net of waivers and
reimbursements 5.91% 5.92% 5.93% 5.67% 3.26% 5.30% 5.80% 3.93% 3.00%
Net investment income,
before waivers and re-
imbursements 5.29% 5.41% 5.40% 5.05% 2.75% 4.74% 5.25% 3.41% 2.82%
Portfolio turnover rate 33.89% 54.46% 88.65% 33.89% 54.46% 828.58% 1,272.21% 1,364.00% 434.32%
Net assets at end of
period (in thousands) $34,183 $32,673 $26,947 $ 52 $ 9 $41,813 $ 45,473 $ 89,803 $186,765
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on March 28, 1994.
(b) Class D units were issued on November 20, 1995.
(c) Commenced investment operations on June 2, 1993.
(d) For the International Bond Portfolio, distributions to unitholders from
net investment income include amounts relating to foreign currency
transactions which are treated as ordinary income for Federal income tax
purposes.
(e) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(f) Annualized for periods less than a full year.
See accompanying notes to financial statements.
23
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
Short-Intermediate Bond Portfolio
---------------------------------------------------------------
Class A Class D
------------------------------------- ------------------------
1996 1995 1994 1993 (A) 1996 1995 1994 (B)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.73 $ 19.53 $ 20.33 $ 20.00 $20.71 $19.53 $19.82
Income (loss) from in-
vestment operations:
Net investment income 1.14 1.02 0.97 0.85 1.07 0.94 0.23
Net realized and
unrealized gain (loss)
on investments (0.01) 1.19 (0.80) 0.31 (0.02) 1.18 (0.29)
- ------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.13 2.21 0.17 1.16 1.05 2.12 (0.06)
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
- ------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.16) (1.01) (0.97) (0.83) (1.10) (0.94) (0.23)
- ------------------------------------------------------------------------------------------
Net increase (decrease) (0.03) 1.20 (0.80) 0.33 (0.05) 1.18 (0.29)
- ------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.70 $ 20.73 $ 19.53 $ 20.33 $20.66 $20.71 $19.53
- ------------------------------------------------------------------------------------------
Total return (c) 5.68% 11.58% 0.84% 5.90% 5.22% 11.09% (0.30)%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.36% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.88% 0.91% 0.95% 1.00% 1.27% 1.30% 1.34%
Net investment income,
net of waivers and re-
imbursements 5.83% 5.14% 4.84% 4.79% 4.96% 4.85% 4.42%
Net investment income,
before waivers and re-
imbursements 5.31% 4.59% 4.25% 4.15% 4.44% 4.30% 3.83%
Portfolio turnover rate 47.68% 54.68% 48.67% 19.48% 47.68% 54.68% 48.67%
Net assets at end of pe-
riod (in thousands) $153,675 $158,678 $96,209 $107,550 $ 343 $ 13 $ 1
- ------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on September 14, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
24
<PAGE>
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
U.S. Government Securities Portfolio
-------------------------------------------------------------------------
Class A Class C Class D
----------------------------------- -------- --------------------------
1996 1995 1994 1993 (a) 1996 (b) 1996 1995 1994 (c)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.08 $ 19.05 $ 20.07 $ 20.00 $ 20.13 $ 20.04 $ 19.05 $19.43
Income (loss) from in-
vestment operations:
Net investment income 1.02 1.05 0.91 0.55 0.91 0.96 0.96 0.22
Net realized and
unrealized gain (loss)
on investments (0.01) 1.02 (1.02) 0.05 (0.12) (0.03) 1.00 (0.38)
- ----------------------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.01 2.07 (0.11) 0.60 0.79 0.93 1.96 (0.16)
- ----------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.02) (1.04) (0.91) (0.53) (0.86) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------------
Total distributions to
unitholders (1.02) (1.04) (0.91) (0.53) (0.86) (0.94) (0.97) (0.22)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) (0.01) 1.03 (1.02) 0.07 (0.07) (0.01) 0.99 (0.38)
- ----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.07 $ 20.08 $ 19.05 $ 20.07 $ 20.06 $ 20.03 $ 20.04 $19.05
- ----------------------------------------------------------------------------------------------------
Total return (d) 5.15% 11.18% (0.57)% 3.00% 4.05% 4.77% 10.66% (0.90)%
Ratio to average net as-
sets of (e):
Expenses, net of waiv-
ers and reimbursements 0.36% 0.36% 0.36% 0.43% 0.60% 0.75% 0.75% 0.75%
Expenses, before waiv-
ers and reimbursements 0.94% 1.09% 1.12% 1.18% 1.18% 1.33% 1.48% 1.51%
Net investment income,
net of waivers and
reimbursements 5.22% 5.43% 4.62% 4.18% 4.97% 4.83% 5.08% 4.65%
Net investment income,
before waivers and
reimbursements 4.64% 4.70% 3.86% 3.43% 4.39% 4.25% 4.35% 3.89%
Portfolio turnover rate 119.75% 141.14% 45.55% 20.59% 119.75% 119.75% 141.14% 45.55%
Net assets at end of pe-
riod (in thousands) $92,351 $56,329 $25,293 $32,479 $ 3,535 $ 225 $ 67 $ 13
- ----------------------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on April 5, 1993.
(b) Class C units were issued on December 29, 1995.
(c) Class D units were issued on September 15, 1994.
(d) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(e) Annualized for periods less than a full year.
See accompanying notes to financial statements.
25
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
For the Years Ended November 30,
<TABLE>
<CAPTION>
U.S. Treasury Index Portfolio
------------------------------------------------------------
Class A Class D
----------------------------------- -----------------------
1996 1995 1994 1993(A) 1996 1995 1994(B)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD $ 20.78 $ 18.77 $ 21.05 $ 20.00 $20.75 $18.77 $18.80
Income (loss) from in-
vestment operations:
Net investment income 1.19 1.11 1.15 0.95 1.17 1.00 0.09
Net realized and
unrealized gain (loss)
on investments (0.18) 2.01 (1.93) 1.02 (0.24) 2.03 (0.03)
- --------------------------------------------------------------------------------------
Total income (loss) from
investment operations 1.01 3.12 (0.78) 1.97 0.93 3.03 0.06
- --------------------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS FROM:
Net investment income (1.19) (1.11) (1.14) (0.92) (1.11) (1.05) (0.09)
Net realized gain on
investments -- -- (0.36) -- -- -- --
- --------------------------------------------------------------------------------------
Total distributions to
unitholders (1.19) (1.11) (1.50) (0.92) (1.11) (1.05) (0.09)
- --------------------------------------------------------------------------------------
Net increase (decrease) (0.18) 2.01 (2.28) 1.05 (0.18) 1.98 (0.03)
- --------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD $ 20.60 $ 20.78 $ 18.77 $ 21.05 $20.57 $20.75 $18.77
- --------------------------------------------------------------------------------------
Total return (c) 5.10% 16.95% (3.80)% 9.94% 4.72% 16.43% 0.37%
Ratio to average net as-
sets of (d):
Expenses, net of waiv-
ers and reimbursements 0.26% 0.26% 0.26% 0.26% 0.65% 0.65% 0.65%
Expenses, before waiv-
ers and reimbursements 1.04% 0.89% 0.79% 0.83% 1.43% 1.28% 1.18%
Net investment income,
net of waivers and re-
imbursements 5.93% 5.09% 5.60% 5.11% 5.57% 5.41% 6.05%
Net investment income,
before waivers and re-
imbursements 5.15% 4.46% 5.07% 4.54% 4.79% 4.78% 5.52%
Portfolio turnover rate 42.49% 80.36% 52.80% 77.75% 42.49% 80.36% 52.80%
Net assets at end of pe-
riod (in thousands) $26,273 $17,674 $37,305 $71,456 $ 848 $ 286 $ --
- --------------------------------------------------------------------------------------
</TABLE>
(a) Commenced investment operations on January 11, 1993.
(b) Class D units were issued on November 16, 1994.
(c) Assumes investment at net asset value at the beginning of the period,
reinvestment of all dividends and distributions, and a complete redemption
of the investment at the net asset value at the end of the period. Total
return is not annualized for periods less than one year.
(d) Annualized for periods less than a full year.
See accompanying notes to financial statements.
26
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
November 30, 1996
1. ORGANIZATION
The Benchmark Funds (the "Trust") is a Massachusetts business trust registered
under the Investment Company Act of 1940 (as amended) as an open-end
management investment company. The Trust includes sixteen portfolios, each
with its own investment objective. The Northern Trust Company ("Northern")
acts as the Trust's investment adviser, transfer agent, and custodian.
Goldman, Sachs & Co. ("Goldman Sachs") acts as the Trust's administrator and
distributor. Presented herein are the financial statements of the fixed income
portfolios (the "Portfolios").
The Bond, International Bond, Short-Intermediate Bond, U.S. Government
Securities, and U.S. Treasury Index Portfolios may issue four separate unit
classes: Class A, B, C and D. Each class is distinguished by the level of
administrative support and transfer agent service provided. As of November 30,
1996, Class A, Class C and Class D units are outstanding for certain
portfolios.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Portfolios in the preparation of their financial statements.
These policies are in conformity with generally accepted accounting principles
("GAAP"). The presentation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates and assumptions.
(a) Investment Valuation
Investments held by a portfolio are valued at the last quoted sale price on
the exchange on which such securities are primarily traded, or if any
securities are not traded on a valuation date, at the last quoted bid price.
Securities which are traded in the over-the-counter markets are valued at the
last quoted bid price. Any securities, including restricted securities, for
which current quotations are not readily available are valued at fair value as
determined in good faith by Northern under the supervision of the Board of
Trustees ("Board"). Short-term investments are valued at amortized cost which
Northern has determined, pursuant to Board authorization, approximates market
value.
(b) Repurchase Agreements
During the term of a repurchase agreement, the market value of the underlying
collateral, including accrued interest, is required to exceed the market value
of the repurchase agreement. The underlying collateral for all repurchase
agreements is held in a customer-only account of Northern, as custodian for
the Trust, at the Federal Reserve Bank of Chicago.
(c) Foreign Currency Translations
Values of investments denominated in foreign currencies are converted into
U.S. dollars using the spot market rate of exchange at the time of valuation.
Cost of purchases and proceeds from sales of investments and interest income
are translated into U.S. dollars using the spot market rate of exchange
prevailing on the respective dates of such transactions.
The gains or losses on investments resulting from changes in foreign exchange
rates are included with net realized and unrealized gain (loss) on
investments.
(d) Investment Transactions and Investment Income
Investment transactions are recorded on the trade date. Realized gains and
losses on investment transactions are calculated on the identified-cost basis.
Interest income is recorded on the accrual basis and includes amortization of
discounts and premiums.
(e) Forward Foreign Currency Exchange Contracts
The International Bond Portfolio is authorized to enter into forward foreign
currency exchange contracts for the
27
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
purchase or sale of a specific foreign currency at a fixed price on a future
date as a hedge or cross-hedge against either specific transactions or
portfolio positions. In addition, the International Bond Portfolio may enter
into foreign currency contracts for speculative purposes. The objective of the
Portfolio's foreign currency hedging transactions is to reduce the risk that
the U.S. dollar value of the Portfolio's foreign currency denominated
securities will decline in value due to changes in foreign currency exchange
rates. All forward foreign currency contracts are "marked-to-market" daily at
the applicable translation rates and any resulting unrealized gains or losses
are recorded in the financial statements. The portfolio records realized gains
or losses when the forward contract is offset by entry into a closing
transaction or extinguished by delivery of the currency. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar.
The contractual amounts of forward foreign currency exchange contracts do not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
(f) Federal Taxes
It is each portfolio's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
each year substantially all of its taxable income and capital gains to its
unitholders. Therefore, no provision is made for federal taxes.
At November 30, 1996, the Trust's most recent tax year end, the portfolios
had approximately the following amounts of capital loss carryforwards for U.S.
federal tax purposes:
<TABLE>
<CAPTION>
AMOUNT YEAR(S) OF EXPIRATION
- ----------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
Bond $1,398 2002 to 2003
Short Duration 581 2002 to 2003
U.S. Government Securities 168 2001 to 2003
U.S. Treasury Index 979 2002
</TABLE>
- -------------------------------------------------------------------------------
These amounts are available to be carried forward to offset future capital
gains to the extent permitted by applicable laws or regulations.
(g) Deferred Organization Costs
Organization related costs are being amortized on a straight-line basis over
five years.
(h) Expenses
Expenses arising in connection with a specific portfolio are allocated to that
portfolio. Certain expenses arising in connection with a class of units are
allocated to that class of units. Expenses incurred which do not specifically
relate to an individual portfolio are allocated among the portfolios based on
each portfolio's relative net assets.
(i) Distributions
Dividends from net investment income are declared and paid as follows:
<TABLE>
<CAPTION>
DECLARED PAID
- -----------------------------------------------
<S> <C> <C>
Bond Monthly Monthly
International Bond Quarterly Quarterly
Short Duration Daily Monthly
Short-Intermediate Bond Monthly Monthly
U.S. Government Securities Monthly Monthly
U.S. Treasury Index Monthly Monthly
- -----------------------------------------------
</TABLE>
Each portfolio's net realized capital gains are distributed at least
annually.
28
<PAGE>
- -------------------------------------------------------------------------------
Income dividends and capital gains distributions are determined in accordance
with income tax regulations. Such amounts may differ from income and capital
gains recorded in accordance with generally accepted accounting principles.
Distributions of short-term and long-term capital gains were declared and
paid December 24, 1996 to unitholders of record on December 23, 1996, as
follows:
<TABLE>
<CAPTION>
SHORT-TERM Long-Term
CAPITAL Capital
GAIN Gain Total
- -----------------------------------------------------
<S> <C> <C> <C>
International Bond $0.0872 $0.2491 $0.3363
Short-Intermediate Bond 0.0123 0.0426 0.0549
- -----------------------------------------------------
</TABLE>
(j) Reclassifications
At November 30, 1996, the Bond Portfolio reclassified approximately $740,000
from accumulated net realized loss on investment transactions to undistributed
net investment income. The International Bond Portfolio reclassified
approximately $439,000 from accumulated net realized gain (loss) on investment
transactions, and $35,000 from net realized loss on foreign currency
transactions, to accumulated undistributed net investment income. The Short-
Intermediate Bond Portfolio reclassified approximately $390,000 from
accumulated net realized gain (loss) on investment transactions to
undistributed net investment income, and the U.S. Government Securities
Portfolio reclassified approximately $11,000 from accumulated net realized
gain (loss) on investment transactions to undistributed net investment income.
These reclassifications had no impact on the net asset value of the Portfolios
and are designed to present the Portfolios' capital accounts on a tax basis.
3. ADVISORY, TRANSFER AGENCY AND CUSTODIAN AGREEMENTS
The Trust has an investment advisory agreement with Northern whereby each
portfolio pays Northern a fee, computed daily and payable monthly, based on a
specified percentage of its average daily net assets. For the current fiscal
year, Northern voluntarily agreed to waive a portion of the advisory fees as
shown on the accompanying Statements of Operations. The annual advisory fees
and waiver rates, expressed as a percentage of average daily net assets for
the year ended November 30, 1996, are as follows:
<TABLE>
<CAPTION>
Net
ADVISORY Less: Advisory
FEE Waiver Fee
- ----------------------------------------------------
<S> <C> <C> <C>
Bond .60% .35% .25%
International Bond .90 .20 .70
Short Duration .40 .25 .15
Short-Intermediate Bond .60 .35 .25
U.S. Government Securities .60 .35 .25
U.S. Treasury Index .40 .25 .15
- ----------------------------------------------------
</TABLE>
As compensation for the services rendered as transfer agent, including the
assumption by Northern of the expenses related thereto, Northern receives a
fee, computed daily and payable monthly, at an annual rate of .01%, .05%,
.10%, and .15% of the average daily net asset value of the outstanding Class
A, B, C and D units, respectively, for the Bond, International Bond, Short-
Intermediate Bond, U.S. Government Securities and U.S. Treasury Index
Portfolios.
As compensation for the services rendered as custodian for the portfolios,
and for the services rendered as transfer agent for the Short Duration
Portfolio, including the assumption by Northern of the expenses related
thereto, Northern receives compensation based on a pre-determined schedule of
charges approved by the Board.
4. ADMINISTRATION AND DISTRIBUTION AGREEMENTS
The Trust has an administration agreement with Goldman Sachs whereby each
portfolio pays the Administrator a fee, computed daily and payable monthly,
based on the average net assets of each portfolio at the rates set forth
below:
29
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS--CONTINUED
November 30, 1996
<TABLE>
<CAPTION>
Average net assets RATE
- ---------------------------------------
<S> <C>
For the first $100,000,000 .250%
For the next $200,000,000 .150
For the next $450,000,000 .075
For net assets over $750,000,000 .050
- ---------------------------------------
</TABLE>
For the current fiscal year, Goldman Sachs voluntarily agreed to limit
administration fees to .10% of average daily net assets for the Bond,
International Bond, Short-Intermediate Bond, U.S. Government Securities and
U.S. Treasury Index Portfolios. In addition, Goldman Sachs agreed to waive a
portion of its administrative fees should overall administration fees earned
during the preceding year exceed certain specified levels. No waiver was
required under this agreement during the year ended November 30, 1996.
Furthermore, Goldman Sachs has agreed to reimburse each portfolio for certain
expenses in the event that such expenses, as defined, exceed on an annualized
basis .10% of the average daily net assets for the Bond, Short-Intermediate
Bond, Short Duration, U.S. Government Securities and U.S. Treasury Index
Portfolios and .25% of the average daily net assets for the International Bond
Portfolio.
The administration fees waived and expenses reimbursed during the year ended
November 30, 1996, are shown on the accompanying Statements of Operations.
Goldman Sachs receives no compensation under the distribution agreement.
5. UNITHOLDER SERVICING PLAN
The Trust has adopted a Unitholder Servicing Plan pursuant to which the Trust
may enter into agreements with institutions or other financial intermediaries
under which they will render certain unitholder administrative support
services for their customers or other investors who beneficially own Class B,
C and D units. As compensation under the Unitholder Servicing Plan, the
institution or other financial intermediary receives a fee at an annual rate
of up to .10%, .15% and .25% of the average daily net asset value of the
outstanding Class B, C and D units, respectively.
6. INVESTMENT TRANSACTIONS
Investment transactions for the year ended November 30, 1996 (excluding short-
term investments) were as follows:
<TABLE>
<CAPTION>
PROCEEDS
FROM SALES PROCEEDS
AND FROM SALES
PURCHASES MATURITIES AND
OF U.S. PURCHASES OF U.S. MATURITIES
GOVERNMENT OF OTHER GOVERNMENT OF OTHER
OBLIGATIONS SECURITIES OBLIGATIONS SECURITIES
- ------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $299,522 $95,138 $230,507 $62,706
International Bond -- 10,260 -- 10,601
Short Duration 49,240 36,941 51,720 38,111
Short-Intermediate Bond 62,699 12,135 62,188 13,881
U.S.Government Securities 136,302 -- 95,525 --
U.S. Treasury Index 16,514 -- 7,346 --
- ------------------------------------------------------------------------
</TABLE>
As of November 30, 1996, the composition of unrealized appreciation
(depreciation) of investment securities (including the effects of foreign
currency translation) based on the aggregate cost of investments for federal
income tax purposes were as follows:
<TABLE>
<CAPTION>
Cost for
Federal
Net Income
Appreciation Tax
Appreciation Depreciation (Depreciation) Purposes
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond $12,054 $2,860 $9,194 $362,017
International Bond 2,935 327 2,608 30,390
Short Duration 2 19 (17) 42,763
Short-Intermediate Bond 2,687 520 2,167 148,991
U.S. Government Securities 655 433 222 94,507
U.S. Treasury Index 571 14 557 26,167
- -----------------------------------------------------------------------------
</TABLE>
30
<PAGE>
- -------------------------------------------------------------------------------
7. BANK LOANS
The Trust maintains a $5,000,000 revolving bank credit line and a $15,000,000
conditional revolving credit line for liquidity and other purposes. Borrowings
under this arrangement bear interest at 1% above the Fed Funds rate and are
secured by pledged securities equal to or exceeding 120% of the outstanding
balance.
Interest expense for the year ended November 30, 1996 was approximately
$1,000 for the International Bond Portfolio. This amount is included in other
expenses on the Statements of Operations.
As of November 30, 1996, there were no outstanding borrowings.
8. UNIT TRANSACTIONS
Transactions in Class A units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
NET
REINVESTED INCREASE
SALES DISTRIBUTIONS REDEMPTIONS (DECREASE)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 7,010 910 3,920 4,000
International Bond 272 81 313 40
Short Duration 6,424 243 7,034 (367)
Short-Intermediate Bond 3,372 424 4,028 (232)
U.S. Government Securities 5,223 211 3,637 1,797
U.S. Treasury
Index 642 37 254 425
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class A units for the year ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
NET
REINVESTED INCREASE
SALES DISTRIBUTIONS REDEMPTIONS (DECREASE)
- ----------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 3,353 696 4,459 (410)
International Bond 297 97 243 151
Short Duration 4,868 388 9,707 (4,451)
Short-Intermediate Bond 4,158 285 1,714 2,729
U.S. Government Securities 2,965 77 1,564 1,478
U.S. Treasury
Index 748 70 1,953 (1,135)
- ----------------------------------------------------------------------
</TABLE>
Transactions in Class C units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- -------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 214 13 51 176
U.S.Government Securities 234 8 66 176
- -------------------------------------------------------------------
</TABLE>
Transactions in Class C units for the period ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- ----------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 201 4 28 177
- ----------------------------------------------
</TABLE>
Transactions in Class D units for the year ended November 30, 1996 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- --------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 6 -- 1 5
International Bond 1 -- -- 1
Short-Intermediate Bond 16 -- -- 16
U.S. Government Securities 10 1 3 8
U.S. Treasury Index 29 1 3 27
- --------------------------------------------------------------------
</TABLE>
Transactions in Class D units for the period ended November 30, 1995 were as
follows:
<TABLE>
<CAPTION>
REINVESTED NET
SALES DISTRIBUTIONS REDEMPTIONS INCREASE
- ---------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Bond 5 -- -- 5
International Bond 1 -- -- 1
U.S. Government Securities 3 -- 1 2
U.S. Treasury Index 13 -- -- 13
- ---------------------------------------------------------------------
</TABLE>
31
<PAGE>
The Benchmark Funds
Fixed Income Portfolios
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
To the Unitholders and Trustees of
The Benchmark Funds
Fixed Income Portfolios
We have audited the accompanying statements of assets and liabilities,
including the statements of investments, of the Bond, International Bond,
Short Duration, Short-Intermediate Bond, U.S. Government Securities and U.S.
Treasury Index Portfolios, comprising the Fixed Income Portfolios of The
Benchmark Funds, as of November 30, 1996, and the related statements of
operations for the year then ended and changes in net assets for each of the
two years in the period then ended and financial highlights for the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
investments owned at November 30, 1996 by physical examination of the
securities held by the custodian and by correspondence with outside
depositories and brokers. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Bond, International Bond, Short Duration, Short-Intermediate Bond, U.S.
Government Securities and U.S. Treasury Index Portfolios, comprising the Fixed
Income Portfolios of The Benchmark Funds, at November 30, 1996, the results of
their operations for the year then ended and the changes in their net assets
for each of the two years in the period then ended and financial highlights
for the periods indicated therein, in conformity with generally accepted
accounting principles.
LOGO
Chicago, Illinois
January 21, 1997
32
<PAGE>
THE BENCHMARK FUNDS
Investment Adviser, Transfer Agent andCustodian
The Northern Trust Company
50 S. LaSalle Street
Chicago, IL 60675
Administrator and Distributor
Goldman, Sachs & Co.
4900 Sears Tower
Chicago, IL 60606
Trustees
William H. Springer, Chairman
Edward J. Condon, Jr.
John W. English
James J. Gavin, Jr.
Frederick T. Kelsey
Richard P. Strubel
Officers
Paul W. Klug, Jr., President
John W. Mosior, Vice President
Nancy L. Mucker, Vice President
Pauline Taylor, Vice President
Scott M. Gilman, Treasurer
John M. Perlowski, Assistant Treasurer
Michael J. Richman, Secretary
Howard B. Surloff, Assistant Secretary
Independent Auditors
Ernst & Young LLP
233 S. Wacker Dr.
Chicago, IL 60606
Legal Counsel
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, PA 19107
This Annual Report is
authorized for distribution to
prospective investors only
when preceded or accompanied
by a Prospectus which contains
facts concerning the
objectives and policies,
management expenses and other
information.
The
Benchmark
Funds
Money
Market
Portfolios
Annual Report
November 30, 1996
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and related report of Ernst & Young LLP,
independent auditors, for the Short Duration Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short Intermediate Bond
Portfolio, Bond Portfolio and International Bond Portfolio contained in the
Annual Report for the fiscal year ended November 30, 1996 are hereby
incorporated herein by reference. No other parts of the Annual Report,
including without limitation "Management's Discussion of Portfolio Performance,"
are incorporated by reference herein. Copies of the Annual Report may be
obtained by writing to Goldman, Sachs & Co., Funds Group, 4900 Sears Tower,
Chicago, Illinois 60606, or by calling Goldman, Sachs toll-free at 800-621-2550.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS
The following summarizes the highest six ratings used by Standard & Poor's
Ratings Group, Inc., a division of McGraw Hill ("S&P") for corporate and
municipal debt:
AAA-Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree.
A-Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB-Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas such issues normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for those in
higher rated categories.
BB and B-Debt rated BB and B is regarded, on balance, as predominantly
speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. Debt
rated BB has less near-term vulnerability to default than other speculative
issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which
1-A
<PAGE>
could lead to inadequate capacity to meet timely interest and principal
payments. Debt rated B has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB-rating.
To provide more detailed indications of credit quality, the ratings AA and lower
may be modified by the addition of a plus or minus sign to show relative
standing within these major rating categories.
S&P may attach the rating "r" to highlight derivative, hybrid and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to non-credit risks.
The following summarizes the highest six ratings used by Moody's Investors
Service, Inc. ("Moody's") for corporate and municipal long-term debt:
Aaa-Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such
issues.
Aa-Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.
A-Bonds that are rated A possess many favorable investment attributes and
are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa-Bonds that are rated Baa are considered medium-grade obligations, i.e.,
they are neither highly protected nor
2-A
<PAGE>
poorly secured. Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable
over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba and B-Bonds that possess one of these ratings provide questionable
protection of interest and principal. Ba indicates some speculative
elements. B indicates a general lack of characteristics of desirable
investment.
The foregoing ratings for corporate and municipal long-term debt are sometimes
presented in parenthesis preceded with a "con", indicating the bonds are rated
conditionally. Such parenthetical rating denotes the probable credit stature
upon completion of construction or elimination of the basis of the condition.
The notation (P) when applied to forward delivery bonds indicates that the
rating is provisional pending delivery of the bonds. The rating may be revised
prior to delivery if changes occur in the legal documents or the underlying
credit quality of the bonds.
The following summarizes the highest six ratings used by Duff & Phelps Credit
Rating Co. ("D&P") for corporate and municipal long-term debt:
AAA-Debt rated AAA is of the highest credit quality. The risk factors are
considered to be negligible, being only slightly more than for risk-free
U.S. Treasury debt.
AA-Debt rated AA is of high credit quality. Protection factors are strong.
Risk is modest but may vary slightly from time to time because of economic
conditions.
A-Bonds that are rated A have protection factors which are average but
adequate. However risk factors are more variable and greater in periods of
economic stress.
BBB-Bonds that are rated BBB have below average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk during economic cycles.
BB and B-Bonds that are rated BB or B are below investment grade. Bonds
rated BB are deemed likely to meet obligations when due. Bonds rated B
possess the risk that the obligations will not be met when due.
To provide more detailed indications of credit quality, the ratings AA and
lower may be modified by the addition of a plus or
3-A
<PAGE>
minus sign to show relative standing within these major categories.
The following summarizes the highest six ratings used by Fitch Investors
Service, Inc. ("Fitch") for corporate and municipal bonds:
AAA-Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA-Bonds considered to be investment grade and of very high credit quality.
The obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated "AAA." Because bonds related in
the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
A-Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB-Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have an adverse impact on these
bonds, and therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than
for bonds with higher ratings.
BB and B-Bonds considered to be speculative investments with respect to the
timely payment of principal and interest in accordance with the terms of
the obligation.
To provide more detailed indications of credit quality, the Fitch ratings "AA"
and lower may be modified by the addition of a plus (+) or minus (-) sign to
show relative standing within these major rating categories.
DESCRIPTION OF MUNICIPAL NOTE RATINGS
The following summarizes the two highest ratings by S&P for short-term municipal
notes:
4-A
<PAGE>
SP-1-Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics are given
a "plus" (+) designation.
SP-2-Satisfactory capacity to pay principal and interest.
The following summarizes the two highest ratings used by Moody's for short-term
municipal notes and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the best
quality, enjoying strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the market for
refinancing.
MIG-2/VMIG-2. Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
The two highest rating categories of D&P for short-term debt are D 1 and D 2.
D&P employs three designations, D 1+, D 1 and D 1-, within the highest rating
category. D 1+ indicates highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations. D 1 indicates very high certainty of timely
payment. Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor. D 1- indicates high certainty of
timely payment. Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small. D 2 indicates good certainty
of timely payment. Liquidity factors and company fundamentals are sound.
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.
D&P uses the fixed-income ratings described above under "Description of Bond
Ratings" for tax-exempt notes and other short-term obligations. Fitch uses the
short-term ratings described below under "Description of Commercial Paper
Ratings" for municipal notes.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted in A-1+. Capacity for timely payment on
commercial paper rated A-2 is satisfactory but the relative degree of safety is
not as high as for issues designated A-1.
5-A
<PAGE>
The rating Prime-1 is the highest commercial paper rating assigned by Moody's.
Issuers or related supporting institutions rated Prime-1 are considered to have
a superior capacity for repayment of short-term promissory obligations.
Issuers or related supporting institutions rated Prime-2 are considered to have
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.
The following summarizes the highest ratings used by Fitch for short-term
obligations:
F-1+ securities possess very strong credit quality. Issues assigned this
rating are regarded as having the strongest degree of assurance for timely
payment.
F-1 securities possess exceptionally strong credit quality. Issues
assigned this rating reflect an assurance of timely payment only slightly
less in degree than issues rated F-1+.
F-2 securities possess good credit quality. Issues assigned this rating
have a satisfactory degree of assurance for timely payment, but the margin
of safety is not as great as the F-1+ and F-1 categories.
D&P uses the short-term ratings described above under "Description of Note
Ratings" for commercial paper.
6-A
<PAGE>
APPENDIX B
As stated in their Prospectus, the Portfolios may enter into futures
transactions and options thereon. Such transactions are described more fully in
this Appendix.
I. INTEREST RATE FUTURES CONTRACTS
Use of Interest Rate Futures Contracts. Bond prices are established in
--------------------------------------
both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within three business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Portfolio could use interest rate
futures contracts as a defense, or hedge, against anticipated
1-B
<PAGE>
interest rate changes. As described below, this could include the use of
futures contract sales to protect against expected increases in interest rates
and the use of futures contract purchases to offset the impact of interest rate
declines.
A Portfolio presently could accomplish a similar result to that which it
hopes to achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market, the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by a Portfolio, through using futures contracts.
Interest rate futures contracts can also be used by a Portfolio for
nonhedging (speculative) purposes to increase total return.
Description of Interest Rate Futures Contracts. An interest rate futures
----------------------------------------------
contract sale would create an obligation by a Portfolio, as seller, to deliver
the specific type of financial instrument called for in the contract at a
specific future time for a specified price. A futures contract purchase would
create an obligation by a Portfolio, as purchaser, to take delivery of the
specific type of financial instrument at a specific future time at a specific
price. The specific securities delivered or taken, respectively, at settlement
date, would not be determined until at or near that date. The determination
would be in accordance with the rules of the exchange on which the futures
contract sale or purchase was made.
Although interest rate futures contracts by their terms call for actual
delivery or acceptance of securities, in most cases the contracts are closed out
before a settlement date without the making or taking of delivery of securities.
Closing out a futures contract sale is effected by a Portfolio's entering into a
futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of a sale exceeds
the price of the offsetting purchase, a Portfolio is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, a Portfolio pays the difference and realizes a loss. Similarly,
the closing out of a futures contract purchase is effected by a Portfolio
entering into a futures contract sale. If the offsetting sale price exceeds the
purchase price, a Portfolio realizes a gain, and if the purchase price exceeds
the offsetting sale price, a Portfolio realizes a loss.
Interest rate futures contracts are traded in an auction environment on the
floors of several exchanges--principally, the Chicago Board of Trade, the
Chicago Mercantile Exchange and the
2-B
<PAGE>
New York Futures Exchange. A Portfolio would deal only in standardized contracts
on recognized exchanges. Each exchange guarantees performance under contract
provisions through a clearing corporation, a nonprofit organization managed by
the exchange membership.
A public market now exists in futures contracts covering various financial
instruments including long-term United States Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month United States Treasury Bills; and ninety-day
commercial paper. A Portfolio may trade in any interest rate futures contracts
for which there exists a public market, including, without limitation, the
foregoing instruments.
II. INDEX FUTURES CONTRACTS
GENERAL. A bond index assigns relative values to the bonds included in the
index which fluctuates with changes in the market values of the bonds included.
A Portfolio may sell index futures contracts in order to offset a decrease
in market value of its portfolio securities that might otherwise result from a
market decline. A Portfolio may do so either to hedge the value of its
portfolio as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, a
Portfolio may purchase index futures contracts in anticipation of purchases of
securities. A long futures position may be terminated without a corresponding
purchase of securities.
In addition, a Portfolio may utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Portfolio expects to narrow the range of industry
groups represented in its holdings it may, prior to making purchases of the
actual securities, establish a long futures position based on a more restricted
index, such as an index comprised of securities of a particular industry group.
A Portfolio may also sell futures contracts in connection with this strategy, in
order to protect against the possibility that the value of the securities to be
sold as part of the restructuring of the portfolio will decline prior to the
time of sale.
Index futures contracts may also be used by a Portfolio for non-hedging
(speculative) purposes, to increase total return.
III. FUTURES CONTRACTS ON FOREIGN CURRENCIES (INTERNATIONAL BOND PORTFOLIO)
A futures contract on foreign currency creates a binding obligation on one
party to deliver, and a corresponding
3-B
<PAGE>
obligation on another party to accept delivery of, a stated quantity of foreign
currency, for an amount fixed in U.S. dollars. Foreign currency futures may be
used by a Portfolio for hedging purposes in anticipation of fluctuations in
exchange rates between the U.S. dollars and other currencies arising from
multinational transactions.
The International Bond Portfolio may also use futures contracts on foreign
currencies for non-hedging (speculative) purposes to increase total return.
IV. MARGIN PAYMENTS
Unlike purchases, or sales of portfolio securities, no price is paid or
received by a Portfolio upon the purchase or sale of a futures contract.
Initially, the Portfolio will be required to deposit with the broker or in a
segregated account with the Custodian or a sub-custodian an amount of liquid
assets, known as initial margin, based on the value of the contract. The nature
of initial margin in futures transactions is different from that of margin in
security transactions in that futures contract margin does not involve the
borrowing of funds by the customer to finance the transactions. Rather, the
initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned to the Portfolio upon termination of the futures
contract assuming all contractual obligations have been satisfied. Subsequent
payments, called variation margin, to and from the broker, will be made on a
daily basis as the price of the underlying instruments fluctuates making the
long and short positions in the futures contract more or less valuable, a
process known as marking-to-the-market. For example, when a particular Portfolio
has purchased a futures contract and the price of the contract has risen in
response to a rise in the underlying instruments, that position will have
increased in value and the Portfolio will be entitled to receive from the broker
a variation margin payment equal to that increase in value. Conversely, where
the Portfolio has purchased a futures contract and the price of the future
contract has declined in response to a decrease in the underlying instruments,
the position would be less valuable and the Portfolio would be required to make
a variation margin payment to the broker. At any time prior to expiration of the
futures contract, the Portfolio's adviser may elect to close the position by
taking an opposite position, subject to the availability of a secondary market,
which will operate to terminate the Portfolio's position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid by or released to the Portfolio, and the Portfolio
realizes a loss or gain.
V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
4-B
<PAGE>
There are several risks in connection with the use of futures by the
Portfolios. In connection with the use of futures for hedging purposes, one
risk arises because of the imperfect correlation between movements in the price
of the futures and movements in the price of the instruments which are the
subject of the hedge. The price of the future may move more than or
less than the price of the instruments being hedged. If the price of the
futures moves less than the price of the instruments which are the subject of
the hedge, the hedge will not be fully effective but, if the price of the
instruments being hedged has moved in an unfavorable direction, the Portfolio
would be in a better position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the futures. If the price of the
futures moves more than the price of the hedged instruments, the Portfolio
involved will experience either a loss or gain on the futures which will not be
completely offset by movements in the price of the instruments which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of instruments being hedged and movements in the price of futures
contracts, the Portfolio may buy or sell futures contracts in a greater dollar
amount than the dollar amount of instruments being hedged if the volatility over
a particular time period of the prices of such instruments has been greater than
the volatility over such time period of the futures, or if otherwise deemed to
be appropriate by Northern. Conversely, the Portfolios may buy or sell fewer
futures contracts if the volatility over a particular time period of the prices
of the instruments being hedged is less than the volatility over such time
period of the futures contract being used, or if otherwise deemed to be
appropriate by Northern. It is also possible that, where a Portfolio had sold
futures to hedge its portfolio against a decline in the market, the market may
advance and the value of instruments held in the Portfolio may decline. If this
occurred, the Portfolio would lose money on the futures and also experience a
decline in value in its portfolio securities.
Where futures are purchased to hedge against a possible increase in the
price of securities before a Portfolio is able to invest its cash (or cash
equivalents) in an orderly fashion, it is possible that the market may decline
instead; if the Portfolio then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Portfolio will realize a loss on the futures contract that is not offset by
a reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the futures and the instruments
being hedged, the price of futures may not correlate perfectly with movement in
the
5-B
<PAGE>
cash market due to certain market distortions. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through off-setting transactions which could distort the normal relationship
between the cash and futures markets. Second, with respect to financial futures
contracts, the liquidity of the futures market depends on participants entering
into off-setting transactions rather than making or taking delivery. To the
extent participants decide to make or take delivery, liquidity in the futures
market could be reduced thus producing distortions. Third, from the point of
view of speculators, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortion in the futures
market, and because of the imperfect correlation between the movements in the
cash market and movements in the price of futures, a correct forecast of general
market trends or interest rate movements by Northern may still not result in a
successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the
Portfolios intend to purchase or sell futures only on exchanges or boards of
trade where there appear to be active secondary markets, there is no assurance
that a liquid secondary market on any exchange or board of trade will exist for
any particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, the Portfolios would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will generally not be sold
until the futures contract can be terminated. In such circumstances, an
increase in the price of the securities, if any, may partially or completely
offset losses on the futures contract. However, as described above, there is no
guarantee that the price of the securities will in fact correlate with the price
movements in the futures contract and thus provide an offset on a futures
contract.
Further, it should be noted that the liquidity of a secondary market in a
futures contract may be adversely affected by "daily price fluctuation limits"
established by commodity exchanges which limit the amount of fluctuation in a
futures contract price during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open futures positions. The
trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
6-B
<PAGE>
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by the Portfolios is also subject to Northern's
ability to predict correctly movements in the direction of the market. For
example, if a particular Portfolio has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Portfolio will lose part or all of the benefit to
the increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Portfolio has insufficient cash, it may have to sell securities to meet
daily variation margin requirements. Such sales of securities may be, but will
not necessarily be, at increased prices which reflect the rising market. The
Portfolios may have to sell securities at a time when they may be
disadvantageous to do so.
Futures purchased or sold by the International Bond Portfolio (and related
options) may be traded in foreign instruments. Participation in foreign futures
and foreign options transactions involves the execution and clearing of trades
on or subject to the rules of a foreign board of trade. Neither the National
Futures Association nor any domestic exchange regulates activities of any
foreign boards of trade, including the execution, delivery and clearing of
transactions, or has the power to compel enforcement of the rules of a foreign
board of trade or any applicable foreign law. This is true even if the exchange
is formally linked to a domestic market so that a position taken on the market
may be liquidated by a transaction on another market. Moreover, such laws or
regulations will vary depending on the foreign country in which the foreign
futures or foreign options transaction occurs. For these reasons, customers who
trade foreign futures of foreign options contracts may not be afforded certain
of the protective measures provided by the Commodity Exchange Act, the Commodity
Futures Trading Commission's ("CFTC") regulations and the rules of the National
Futures Association and any domestic exchange, including the right to use
reparations proceedings before the CFTC and arbitration proceedings provided by
the National Futures Association or any domestic futures exchange. In
particular, the investments of the International Bond Portfolio's in foreign
futures or foreign options transactions may not be provided the same protections
in respect of transactions on United States futures exchanges. In addition, the
price of any foreign futures or foreign options contract and, therefore the
potential profit and loss thereon may be affected by any variance in the foreign
exchange rate between the time an order is placed and the time it is liquidated,
offset or exercised.
VI. OPTIONS ON FUTURES CONTRACTS
7-B
<PAGE>
The Portfolios may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Portfolio will be required to deposit initial margin and
variation margin with respect to put and call options on futures contracts
written by it pursuant to brokers' requirements similar to those described
above. Net option premiums received will be included as initial margin deposits.
Investments in futures options involve some of the same considerations that
are involved in connection with investments in futures contracts (for example,
the existence of a liquid secondary market). See "Risks of Transactions in
Futures Contracts" above. In addition, the purchase or sale of an option also
entails the risk that changes in the value of the underlying futures contract
will not correspond to changes in the value of the option purchased. Depending
on the pricing of the option compared to either the futures contract upon which
it is based, or upon the price of any underlying instruments, an option may or
may not be less risky than ownership of the futures contract or such
instruments. In general, the market prices of options can be expected to be
more volatile than the market prices on the underlying futures contract.
Compared to the purchase or sale of futures contracts, however, the purchase of
call or put options on futures contracts may, unlike futures contracts where the
risk of loss is potentially unlimited, frequently involve less potential risk to
the Portfolio because the maximum amount at risk is the premium paid for the
options (plus transaction costs). The writing of an option on a futures
contract involves risks similar to those risks relating to the sale of futures
contracts.
VII. OTHER MATTERS
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
8-B
<PAGE>
PART C.
OTHER INFORMATION
ITEM 24.FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements
Included in the Prospectus:
None
Incorporated by reference in the Statement of Additional Information:
Statement of Investments as of November 30, 1996 for the Short Duration, U.S.
Government Securities, Short-Intermediate Bond, U.S. Treasury Index, Bond and
International Bond Portfolios.
Statement of Assets and Liabilities as of November 30, 1996 for the Short
Duration, U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury
Index, Bond and International Bond Portfolios.
Statement of Operations for the year ended November 30, 1996 for the Short
Duration, U.S. Government Securities, Short-Intermediate Bond, U.S. Treasury
Index, Bond and International Bond Portfolios.
Statement of Changes in Net Assets for the years ended November 30, 1996 and
November 30, 1995 for the Short Duration, U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond and International Bond Portfolios.
(b)Exhibits
The following exhibits are incorporated herein by reference to Registrant's
Registration Statement on Form N-1A as initially filed (Reference A), to Pre-
Effective Amendment No. 1 (Reference B), to Post-Effective Amendment No. 1 to
such Registration Statement (Reference C), to Post-Effective Amendment No. 2 to
such Registration Statement (Reference D), to Post-Effective Amendment No. 4 to
such Registration Statement (Reference E), to Post-Effective Amendment No. 7 to
such Registration Statement (Reference F), to Post-Effective Amendment No. 11 to
such Registration Statement (Reference G), to Post-Effective Amendment No. 12 to
such Registration Statement (Reference H), to Post-Effective Amendment No. 13 to
such Registration Statement (Reference I), to Post-Effective Amendment No. 16 to
such Registration Statement (Reference J), to Post-Effective Amendment No. 17 to
such Registration Statement (Reference K), to Post-Effective Amendment No. 19 to
such Registration Statement (Reference L), to Post-Effective Amendment No. 20 to
such Registration Statement (Reference M), to Post-Effective Amendment No. 21 to
such Registration Statement (Reference N), to Post-Effective Amendment No. 22 to
such Registration Statement (Reference O) , to Post-Effective Amendment No. 23
to such Registration Statement (Reference P), to Post-Effective Amendment No. 25
to such Registration Statement (Reference Q), to Post-Effective Amendment No. 26
to such Registration Statement (Reference R), to
<PAGE>
Post-Effective Amendment No. 27 to such Registration Statement (Reference S), to
Post-Effective Amendment No. 28 to such Registration Statement (Reference T)and
to Post Effective Amendment No. 32 to such Registration Statement (Reference U).
<TABLE>
<CAPTION>
<S> <C>
1 - Agreement and Declaration of Trust dated July 15, 1982 (Reference A).
1(a)- Amendment No. 1 dated November 22, 1982 to Agreement and Declaration
of Trust (Reference A).
1(b)- Amendment No. 2 dated April 21, 1983 to Agreement and Declaration of Trust (Reference B).
1(c)- Amendment No. 3 dated May 19, 1983 to Agreement and Declaration of Trust (Reference B).
1(d)- Amendment No. 4 dated May 19, 1983 to Agreement and Declaration of Trust (Reference B).
1(e)- Amendment No. 5 dated May 19, 1983 to Agreement and Declaration of Trust (Reference B).
1(f)- Amendment No. 6 dated December 19, 1983 to Agreement and Declaration of Trust (Reference
D).
1(g)- Amendment No. 7 dated August 23, 1985 to Agreement and Declaration of Trust (Reference
E).
1(h)- Amendment No. 8 dated September 26, 1990 to Agreement and Declaration of Trust (Reference
H).
1(i)- Amendment No. 9 dated October 1, 1990 to Agreement and Declaration of Trust (Reference
H).
1(j)- Amendment No. 10 to Agreement and Declaration of Trust (Reference I).
1(k)- Amendment No. 11 to Agreement and Declaration of Trust (Reference J).
1(l)- Amendment No. 12 to Agreement and Declaration of Trust (Reference L).
1(m)- Amendment No. 13 to Agreement and Declaration of Trust (Reference P).
1(n)- Amendment No. 14 dated July 11, 1995 to Agreement and Declaration of Trust (Reference U).
2- By-Laws of the Registrant (Reference A).
2(a)- Amendment dated May 9, 1983 to Section 2.3 of the By-Laws (Reference B).
2(b)- Amendment dated April 21, 1983 to Sections 1.1 and 5.3 of the By-Laws (Reference D).
</TABLE>
C-2
<PAGE>
<TABLE>
<S> <C>
2(c)- Amendment dated August 29, 1983 to Section 6.3 of the By-Laws (Reference D).
2(d)- Amendment dated December 19, 1983 to Sections 1.1 and 5.3 of the By-Laws (Reference D).
2(e)- Amendment dated January 26, 1987 to Section 3.7 of the By-Laws (Reference F).
3- Not Applicable.
4- Instruments Defining Rights of Shareholders (Articles IV and V of the Agreeement and
Declaration of Trust dated July 15, 1982, as amended to date, is incorporated by
reference to Exhibits 1 hereof).
5- Advisory Agreement dated October 5, 1990 between Registrant and The Northern Trust
Company (Reference H).
5(a)- Addendum No. 1 to Advisory Agreement between Registrant and The Northern Trust Company
(Reference I).
5(b)- Addendum No. 1, dated June 8, 1992, to Investment Advisory Agreement, dated October 5,
1990, between The Northern Trust Company and the Registrant (Reference J).
5(c)- Addendum No. 2 to Investment Advisory Agreement between the Registrant and The Northern
Trust Company (Reference K).
5(d)- Addendum No. 3 to Investment Advisory Agreement between the Registrant and The Northern
Trust Company (Reference M).
5(e)- Addendum No. 4 to Investment Advisory Agreement between the Registrant and The Northern
Trust Company (Reference S).
6- Distribution Agreement dated June 8, 1992 between Registrant and Goldman, Sachs & Co.
(Reference I).
6(a)- Addendum No. 1 to Distribution Agreement between the Registrant and Goldman, Sachs & Co.
(Reference K).
6(b)- Addendum No. 2 to Distribution Agreement between the Registrant and Goldman, Sachs & Co.
(Reference L).
6(c)- Addendum No. 3 to Distribution Agreement between the Registrant and Goldman, Sachs & Co.
(Reference T).
7 - Not Applicable.
8- Custodian Agreement dated June 8, 1992 between Registrant and The Northern Trust Company
(Reference I).
</TABLE>
C-3
<PAGE>
<TABLE>
<S> <C>
8(a)- Addendum No. 1 to Custodian Agreement between the Registrant and The Northern Trust
Company (Reference J).
8(b)- Addendum No. 2 to Custodian Agreement between Registrant and The Northern Trust Company
(Reference L).
8(e)- Foreign Custody Agreement between the Registrant and The Northern Trust Company
(Reference T).
9 - Agreement and Plan of Reorganization between Registrant and The Benchmark Tax-Exempt Fund
(Reference G).
9(a)- Revised and Restated Transfer Agency Agreement between Registrant and The Northern Trust
Company, dated January 8, 1993 (Reference J).
9(b)- Addendum No. 1 to Transfer Agency Agreement between the Registrant and The Northern Trust
Company (Reference L).
9(c)- Addendum No. 2 to Transfer Agency Agreement between the Registrant and The Northern Trust
Company (Reference S).
9(f)- Administration Agreement dated June 8, 1992 between Registrant and Goldman, Sachs & Co.
(Reference I).
9(g)- Amendment dated August 1, 1992 to Administration Agreement dated June 8, 1992 between
Registrant and Goldman, Sachs & Co. (Reference J).
9(h)- Addendum No. 1 to Administration Agreement between the Registrant and Goldman, Sachs &
Co. (Reference K).
9(i)- Addendum No. 2 to Administration Agreement between the Registrant and Goldman, Sachs &
Co. (Reference L).
9(j)- Addendum No. 3 to Administration Agreement between the Registrant and Goldman, Sachs &
Co. (Reference S).
12- Not Applicable.
13- Subscription Agreement with Goldman, Sachs & Co. (Reference B).
13(a)- Amendment No. 1 to Subscription Agreement with Goldman, Sachs & Co. (Reference B).
13(b)- Amendment No. 2 to Subscription Agreement with Goldman, Sachs & Co. (Reference C).
13(c)- Amendment No. 3 to Subscription Agreement with Goldman, Sachs & Co. (Reference E).
14- Not Applicable.
15- Not Applicable.
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
16- Schedule for computation of performance data for Equity Index Portfolio, Diversified
Growth Portfolio, U.S. Schedule for computation of performance data for Equity Index
Portfolio, Short-Intermediate Bond Treasury Index (Reference L). Portfolio and Bond
Portfolio
16(a)- Schedule for computation of performance data for Diversified Assets Portfolio, Government
Portfolio, Government Select Portfolio, Tax-Exempt Portfolio and California Municipal
Portfolio (Reference M).
16(b)- Schedule for computation of performance data for U.S. Government Securities Portfolio
(Reference N).
16(c)- Schedule for computation of performance data for Short Duration Portfolio (Reference O).
16(d)- Schedule for computation of performance data for Balanced Portfolio, Diversified Growth
Portfolio, Equity Index Portfolio, Focused Growth Portfolio and Small Company Index
Portfolio (Reference Q).
18- Plan entered into by Registrant pursuant to Rule 18f-3 (Reference U).
27- Financial Data Schedules++.
</TABLE>
The following exhibits relating to The Benchmark Funds are filed herewith
electronically pursuant to EDGAR rules:
<TABLE>
<S> <C>
1(o)- Amendment No. 15 to Agreement and Declaration of Trust.
1(p)- Amendment No. 16 to Agreement and Declaration of Trust.
5(f)- Addendum No. 5 to Investment Advisory Agreement between the Registrant
and The Northern Trust Company.
5(g)- Form of Addendum No. 6 to Investment Advisory Agreement between the
Registrant and The Northern Trust Company.
6(d)- Addendum No. 4 to Distribution Agreement between the Registrant and
Goldman, Sachs & Co .
</TABLE>
C-5
<PAGE>
<TABLE>
<S> <C>
6(e)- Form of Addendum No. 5 to Distribution Agreement between the Registrant
and Goldman, Sachs & Co.
8(c)- Addendum No. 3 to Custodian Agreement between Registrant and The Northern
Trust Company.
8(d)- Form of Addendum No. 4 to Custodian Agreement between Registrant and The
Northern Trust Company.
8(f)- Addendum No. 1 to Foreign Custody Agreement between the Registrant and
the Northern Trust Company.
9(d)- Addendum No. 3 to Transfer Agency Agreement between the Registrant and
The Northern Trust Company .
9(e)- Form of Addendum No. 4 to Transfer Agency Agreement between the
Registrant and The Northern Trust Company.
9(k)- Addendum No. 4 to Administration Agreement between the Registrant and
Goldman, Sachs & Co.
9(l)- Form of Addendum No. 5 to Administration Agreement between the Registrant
and Goldman, Sachs & Co.
9(m)- Form of Amended and Restated Administration Agreement between the Registrant and Goldman,
Sachs & Co.
9(n)- Form of Unitholder Servicing Plan for Subseries B,C, and D Units and Related Form of
Servicing Agreement for Subseries B, C, and D Units.
11(a)- Consent of Counsel.
11(b)- Consent of Ernst & Young LLP
18- Plan pursuant to Rule 18f-3
19- Other Exhibits
- Power of Attorney
For Trustees and certain Officers:
Paul Klug
Scott Gilman
William H. Springer
James J. Gavin, Jr.
Frederick T. Kelsey
Edward J. Condon
John W. English
Richard P. Strubel
</TABLE>
- --------------------
++ Financial Data Schedules relating to the financial information incorporated
by reference in the Statement of Additional Information included in this
filing for the Fixed Income Portfolios were filed on March 27, 1997 as
Exhibit 27 to Post-Effective Amendment No. 33.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
-------------------------------------------------------------
Registrant is controlled by its Board of Trustees.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
-------------------------------
<TABLE>
<CAPTION>
Number of Record
Holders as of
Title of Class May 2, 1997
- ------------------------------------------------------ -------------------------------
Class A Class C Class D
------- ------- -------
<S> <C> <C> <C>
Diversified Assets Portfolio Units...... 1 N/A N/A
Government Portfolio Units.............. 1 N/A N/A
Government Select Portfolio Units....... 1 N/A N/A
Tax-Exempt Portfolio Units.............. 1 N/A N/A
Equity Index Portfolio Units............ 1 1 1
Small Company Index Portfolio Units..... 1 1 1
</TABLE>
C-6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Diversified Growth Portfolio Units ..... 1 N/A 1
Focused Growth Portfolio Units ......... 1 1 1
U.S. Treasury Index Portfolio Units.... 1 1 1
U.S. Government Securities Portfolio.... 1 N/A 1
Short-Intermediate Bond Portfolio Units. 1 N/A 1
Bond Portfolio Units .................. 1 1 1
Short Duration Portfolio Units ........ 1 1 N/A
Balanced Portfolio Units .............. 1 1 1
International Growth Portfolio Units .. 1 1 1
International Bond Portfolio Units ..... 1 N/A 1
International Equity Index Portfolio.... 4 N/A N/A
</TABLE>
ITEM 27. INDEMNIFICATION
---------------
Section 6.4, 6.5 and 6.6 of the Registrant's Agreement and Declaration of Trust
provide for indemnification of the Registrant's Trustees and officers under
certain circumstances. A copy of such Agreement and Declaration of Trust was
filed as Exhibit 1 to Registrant's Registration Statement on Form N-1A as
initially filed and a copy of Section 6.5 thereof (as amended) was filed as
Exhibit 1(d) to Pre-Effective Amendment No. 1 to such Registration
Statement.
Paragraph 7 of the Advisory Agreement between the Registrant and The Northern
Trust Company provides for indemnification of The Northern Trust Company or, in
lieu thereof, contribution by the Registrant, under certain circumstances. A
copy of the Advisory Agreement is filed as Exhibit 5(b) to Post-Effective
Amendment No. 12 to Registrant's Registration Statement on Form N-1A.
Paragraph 7 of the Administration Agreement between the Registrant and Goldman,
Sachs & Co. provides for indemnification of Goldman, Sachs & Co. or, in lieu
thereof, contribution by the Registrant, under certain circumstances. Copies of
the Administration Agreement was filed as Exhibit 17(e) to Post-Effective
Amendment No. 13 to Registrant's Registration Statement on Form N-1A.
A mutual fund and trustee and officer liability policy purchased jointly by the
Registrant and other investment companies advised and/or distributed by Goldman,
Sachs & Co. insures such persons and their respective Trustees, partners,
officers and employees, subject to the policy's coverage limits and exclusions
and varying deductibles, against loss resulting from claims by reason of any
act, error, omission, misstatement, misleading statement, neglect or breach of
duty.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
----------------------------------------------------
The Northern Trust Company, Registrant's investment adviser, is a full service
commercial bank and also provides a full range of trust and fiduciary services.
Set forth below is a list of all of the directors, senior officers and those
officers primarily responsible for Registrant's affairs of The Northern Trust
Company and, with respect to each such person, the name and business address of
the company (if any) with which such person has been
C-7
<PAGE>
connected at any time since June 1, 1990, as well as the capacity in which such
person was connected.
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------ -------------
<S> <C> <C>
Dolores E. Cross Northern Trust Director
Corporation
50 S. LaSalle Street
Chicago, IL 60675
Chicago State President
University
95th Street at
King Drive
Chicago, IL 60643
John R. Goodwin None
Vice President
Robert S. Hamada The University Edward Eagle
Director of Chicago Brown
Graduate School of Distinguished
Business Service
1101 East 58th Street Professor of
Chicago, IL 60637 Finance and
Dean
Northern Trust Director
Corporation
50 S. LaSalle Street
Chicago, IL 60675
A.M. Castle & Co. Director
3400 North Wolf Road
Franklin Park, IL 60131
Chicago Board of Trade Director
141 West Jackson
Boulevard
Chicago, IL 60604
Barry G. Hastings Northern Trust President &
President & Chief Corporation Chief Operating
Operating Officer & 50 S. LaSalle Street Officer &
Director & Former Chicago, IL 60675 Director
Vice Chairman and
Senior Northern Trust Director
Executive Vice Securities, Inc.
President 50 S. LaSalle Street
Chicago, IL 60675
</TABLE>
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<PAGE>
<TABLE>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------------ ---------------
<S> <C> <C>
Barry G. Hastings Northern Trust of Director
(cont'd) California Corporation
355 S. Grand Avenue
Los Angeles, CA 90017
Northern Trust Vice Chairman
of Florida of the Board
Corporation & Director
700 Brickell Avenue
Miami, FL 33131
Nortrust Realty Director
Management, Inc.
50 South LaSalle Street
Chicago, IL 60675
Robert A. Helman Mayer, Brown & Platt Partner
Director 190 S. LaSalle Street
Chicago, IL 60603
Northern Trust Director
Corporation
50 S. LaSalle Street
Chicago, IL 60675
Chicago Stock Exchange Governor
One Financial Plaza
440 S. LaSalle St.
Chicago, Il 60605
The Horsham Director
Corporation
24 Hazelton Avenue
Toronto, Ontario,
Canada
M5R 2E2
Alberta Natural Gas Director
Company, Ltd.
2900, 240 Fourth Ave., N.W.
Calgary, Alberta
Canada T2P 4L7
Brambles USA, Inc. Director
400 N. Michigan Avenue
Chicago, IL 60611
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- --------------------- -------------
<S> <C> <C>
Artur L. Kelly KEL Enterprises Ltd. Managing
Director 135 S. LaSalle Street Partner
Chicago, IL 60603
Bayerische Motoren Director
Werke(BMW) A.G. BMW Haus
Petuelring 130
Postfach 40 02 40
D-8000
Munich 40 Germany
Deere & Company Director
John Deere Rd.
Moline, IL 61265
Northern Trust Director
Corporation
50 S. LaSalle Street
Chicago, IL 60675
Nalco Chemical Director
Company
One Nalco Center
Naperville, IL
60563-1198
Snap-on Incorporated Director
2801 80th Street
Kenosha, WI 53140
Tejas Gas Corporation Director
1301 McKinney St.
Houston, TX 77010
Robert D. Krebs Santa Fe Pacific Former Chairman, Director
Director Corporation President
1700 E. Golf Road and Chief
Schaumburg, IL Executive
60173-5860 Officer &
Director
Burlington Northern President and
Santa Fe Corporation Chief Executive
PO Box 961052 Officer&
Fort Worth, TX Director
76101-0052
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------- -------------
<S> <C> <C>
Robert D. Krebs Burlington Northern Director
(cont'd) Inc
777 Main Street
Fort Worth, TX 76102
Burlington Northern Director
Railroad Company
777 Main Street
Fort Worth, TX 76102
Santa Fe Pacific Director
Pipelines, Inc.
888 S. Figueroa Street
Los Angeles, CA 90017
Northern Trust Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
Phelps Dodge Director
Corporation
2600 North Central Ave.
Phoenix, AZ
85004-3014
Santa Fe Energy Director
Resources, Inc.
1616 South Voss Road
Houston, TX 77057
Santa Fe Pacific Director
Gold Corporation
P.O. Box 27019
Albuquerque, NM 87125
Santa Fe Pacific Director
Gold Corporation
6200 Uptown Blvd.
Albuquerque, NM 87110
Frederick A. Krehbiel Molex Incorporated Chairman and
Director 2222 Wellington Court Chief Executive
Lisle, IL 60532-1682 Officer, Former
Vice Chairman
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------ -------------
<S> <C> <C>
Frederick A. Krehbiel Northern Trust Director
Director Corporation
50 South LaSalle Street
Chicago, IL 60675
Nalco Chemical Company Director
One Nalco Center
Naperville, IL 60563-1198
Tellabs, Inc. Director
4951 Indiana Avenue
Lisle, IL 60532
Roger W. Kushla The Northern Trust Director
Senior Vice President Company of New York
80 Broad Street, 19th Fl.
New York, NY 10004
Robert A. LaFleur None
Senior Vice President
Thomas L. Mallman None
Senior Vice President
James J. Mitchell, III The Northern Trust Director
Executive Vice Company of New York
President 80 Broad Street, 19th Fl.
New York, NY 10004
William G. Mitchell Northern Trust Director
Director Corporation
50 South LaSalle Street
Chicago, IL 60675
The Interlake Director
Corporation
7701 Harger Road
Oak Brook, IL
60521-1488
Peoples Energy Director
Corporation
122 South Michigan
Avenue
Chicago, IL 60603
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------------- ---------------
<S> <C> <C>
William G. Mitchell The Sherwin-Williams Director
Company
101 Prospect Avenue, N.W.
Cleveland, OH 44115-1075
Edward J. Mooney Nalco Chemical Company Chairman, Chief
Director Are Nalco Center Executive
Naperville, Il Officer,
60663-1198 President &
Director
Morton International, Inc. Director
100 North Riverside Plaza
Chicago, Il 60605
William A. Osborn Northern Trust Director
Chairman and Corporation
Chief Executive Securities, Inc.
Officer 50 S. LaSalle Street
Former President Chicago, IL 60675
and Chief Operating
Officer& Former Senior Northern Trust of Director
Executive Vice California Corporation and Former
President 355 S. Grand Avenue Chairman of
Los Angeles, CA 90017 the Board
Northern Trust Bank of Former Chairman
California N.A. of the Board
355 S. Grand Avenue
Los Angeles, CA 90017
Nortrust Realty Director
Management Inc.
50 S. LaSalle St.
Chicago, IL 60675
Northern Futures Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
Sheila A. Penrose Northern Trust Global Director
Executive Vice Advisors, Inc.
President 29 Federal Street
Stamford, CT 06901
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ----------------------- ----------------
<S> <C> <C>
Perry R. Pero Northern Futures Director
Senior Executive Vice Corporation
Vice President, 50 South LaSalle Street
Chief Financial Chicago, IL 60675
Officer and
Cashier Northern Investment Former Chairman,
Corporation President
50 South LaSalle Street and Director
Chicago IL 60675 Former Treasurer
Northern Trust Director
Securities, Inc.
50 South LaSalle Street
Chicago, IL 60675
Nortrust Realty Director
Management, Inc.
50 South LaSalle Street
Chicago, IL 60675
Peter L. Rossiter Schiff, Hardin Former
Executive Vice & Waite Partner
7200 Sears Tower
Chicago, IL 60606
Tanglewood Bancshares Former Vice
Inc Presidentand
600 Bering Dr. Director
Houston, TX 77057
</TABLE>
C-14
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- ------------------- -------------
<S> <C> <C>
Peter L. Rossiter Consolidated Director
(cont'd) Communications Inc.
Illinois Consolidated
Telephone Company
121 S. 17th St.
Mattoon, IL 61938
Northern Trust Executive
Corporation Vice
50 South LaSalle President,
Street General
Chicago, IL 60675 Counsel and
Secretary
Harold B. Smith Illinois Tool Chairman of
Director Works Inc. the Executive
3600 West Lake Committee
Avenue and a
Glenview, IL Director
60025-5811
Northern Trust Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
W. W. Grainger, Inc. Director
5500 West Howard Street
Skokie, IL 60077
Northwestern Mutual Trustee
Life Insurance Co.
720 East Wisconsin Avenue
Milwaukee, WI 53202
William D. Smithburg The Quaker Oats Chairman,
Director Company President and
321 North Clark Street Chief Executive
Chicago, IL 60610 Officer
and Director
Northern Trust Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
</TABLE>
C-15
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Connection
Name and Position Business Address with
with Investment Adviser of Other Company Other Company
- ------------------------- -------------------- -------------
<S> <C> <C>
William D. Smithburg Abbott Laboratories Director
(cont'd) One Abbott Park Road
Abbott Park, Il 60675
Corning Incorporated Director
Corning, Ny 14831
Prime Capital Director
Corporation
P.O. Box 8460
Rolling Meadows,
IL 60008
James M. Snyder None
Senior Vice
President
Bide L. Thomas Commonwealth Edison Former
Company President
One First National and a
Plaza Former
Chicago, IL 60603 Director
MYR Group Inc. Director
*(formerly L.E. Myers
Company)
2550 W. Golf Rd.
Rolling Meadows, IL 60008
Northern Trust Director
Corporation
50 South LaSalle Street
Chicago, IL 60675
R. R. Donnelley Director
& Sons Company
77 West Wacker Drive
Chicago, IL 60601
</TABLE>
* Name change
ITEM 29. PRINCIPAL UNDERWRITERS
----------------------
(a) Goldman, Sachs & Co., or an affiliate or a division thereof, currently
serves as investment adviser and distributor of the units or shares of
Goldman Sachs Money Market Trust, Goldman Sachs Trust, Goldman Sachs Equity
Portfolios, Inc. and Trust for Credit Unions. Goldman, Sachs & Co., or a
division
C-16
<PAGE>
thereof, currently serves as administrator and distributor for The
Benchmark Funds and The Commerce Funds.
(b) Set forth below is certain information pertaining to the executive
committee of Goldman, Sachs & Co., Registrant's principal underwriter.
None of the members of the executive committee hold positions or offices
with the Registrant.
GOLDMAN SACHS EXECUTIVE COMMITTEE
---------------------------------
Name and Principal
Business Address Position
---------------- --------
Jon S. Corzine (1) Chief Executive Officer
Robert J. Hurst (1) Managing Director
Henry M. Paulson, Jr.(1) Chief Operating Officer
John A. Thain (1)(3) Chief Financial Officer
John L. Thornton (3) Managing Director
Roy J. Zuckerberg (2) Managing Director
______________________
(1) 85 Broad Street, New York, NY 10004
(2) One New York Plaza, New York, NY 10004
(3) Peterborough Court, 133 Fleet Street, London EC4A 2BB,
England
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
--------------------------------
The Agreement and Declaration of Trust, By-laws and minute books of the
Registrant are in the physical possession of Goldman, Sachs & Co., Goldman Sachs
Asset Management, 85 Broad Street, New York, New York, 10004. Records relating
to Goldman, Sachs & Co.'s functions as distributor and administrator for the
Registrant are located at the same address. All other accounts, books and other
documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are in the physical
possession of The Northern Trust Company, 50 S. LaSalle Street, Chicago,
Illinois 60675.
ITEM 31. MANAGEMENT SERVICES
-------------------
Not Applicable.
ITEM 32. UNDERTAKINGS
------------
(a) The Annual Report will contain certain performance information and is
available to any recipient of the Prospectuses upon request and without
charge by writing to Goldman, Sachs & Co., 4900 Sears Tower, Chicago,
Illinois 60606.
C-17
<PAGE>
(b) The Registrant undertakes to file a post-effective amendment with respect
to the Intermediate Bond Portfolio within four to six months from the
effective date of the Post-Effective Amendment to the Registrant's
Registration Statement relating to the registration of such of
Portfolio.
C-18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 34 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City and State of New York on the
15th day of May 1997.
THE BENCHMARK FUNDS
/s/ Michael J. Richman
By:______________________________
Michael J. Richman
Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Name Title Date
---- ----- ----
PAUL W. KLUG * President May 15, 1997
---------------------
Paul W. Klug
SCOTT M. GILMAN * Treasurer May 15, 1997
- ---------------------
Scott M. Gilman
WILLIAM H. SPRINGER * Trustee May 15, 1997
---------------------
William H. Springer
JAMES J. GAVIN, JR.* Trustee May 15, 1997
- -----------------------
James J. Gavin, Jr.
FREDERICK T. KELSEY * Trustee May 15, 1997
- ----------------------
Frederick T. Kelsey
EDWARD J.CONDON * Trustee May 15, 1997
- ---------------------
Edward J. Condon
C-19
<PAGE>
JOHN W. ENGLISH * Trustee May 15, 1997
- --------------------
John W. English
RICHARD P. STRUBEL * Trustee May 15, 1997
- ---------------------
Richard P. Strubel
*By: /s/ Michael J. Richman May 15, 1997
- ------------------------------
Michael J. Richman,
Attorney-in-fact
C-20
<PAGE>
EXHIBIT 1(o)
THE BENCHMARK FUNDS
AMENDMENT NO. 15 TO AGREEMENT AND DECLARATION OF TRUST
WHEREAS, Section 4.1 of the Agreement and Declaration of Trust dated July
15, 1982, as amended, (the "Declaration") of The Benchmark Funds (the "Trust")
provides that the Declaration may be amended to establish and designate new
Series of Units by an instrument in writing executed by a majority of the
Trustees of the Trust and setting forth such establishment and designation and
the relative rights and preferences of such Series;
NOW THEREFORE, the undersigned, being a majority of the Trustees of the
Trust hereby:
(1) amend the Declaration by designating and establishing an additional
Series of Units (the "Additional Series") to be known as "International Equity
Index Portfolio Units". Except as otherwise provided for below with respect to
Units of a particular Subseries of the Additional Series, all Units of the
Additional Series shall be identical and shall have the relative rights and
preferences set forth in Subsections (a) through (k) of Section 4.2 of the
Declaration;
(2) amend the Declaration by designating and establishing four Subseries,
respectively Subseries A, B, C and D, within the Additional Series. Units of a
particular Subseries of the Additional Series shall also be Units of that Series
under the Declaration. Pursuant to Section 4.1 of the Declaration, Units of
each respective Subseries shall have the following relative rights and
preferences:
(a) Liabilities belonging to Subseries. Each Subseries of the
----------------------------------
Additional Series shall bear a pro rata portion of the "liabilities
belonging to" such Additional Series. In addition, to the extent permitted
by rule or order of the Securities and Exchange Commission and as may be
from time to time determined by the Board of Trustees (whether or not Units
of a particular Subseries affected are issued and outstanding):
(i) Subseries A Units of the Additional Series and no other
Subseries established hereby shall bear such expenses, costs, charges
and reserves as the Board of Trustees may from time to time determine
are directly attributable to such Units and which should therefore be
borne solely by such Units;
(ii) Subseries B Units of the Additional Series and no other
Subseries established hereby shall bear (1) the expenses and
liabilities of payments to institutions under any agreements entered
into by or on behalf of the Trust which expenses are incurred for
services by the institutions exclusively for beneficial Unitholders of
such Subseries B, (2) expenses and liabilities arising from transfer
agency services that the Board of Trustee may from time to time
determine are directly attributable to such Subseries B Units, and (3)
such other expenses, costs, charges and reserves as the Board of
Trustees may from time to time determine are directly attributable to
such Subseries B Units and which should therefore be borne solely by
such Units;
(iii) Subseries C Units of the Additional Series and no other
Subseries established hereby shall bear (1) the expenses and
liabilities of payments to institutions under any agreements entered
into by or on behalf of the Trust which expenses are incurred for
services by the institutions exclusively for beneficial Unitholders of
such Subseries C, (2) expenses and liabilities arising from transfer
agency services that the Board of Trustees may from time to time
determine are directly attributable to such Subseries C Units, and (3)
such other expenses, costs, charges and reserves as the Board of
Trustees may from time to time determine are directly attributable to
such Subseries C Units and which should therefore be borne solely by
such Units;
<PAGE>
(iv) Subseries D Units of the Additional Series and no other
Subseries established hereby shall bear (1) the expenses and
liabilities of payments to institutions under any agreements entered
into by or on behalf of the Trust which expenses are incurred for
services by the institutions exclusively for beneficial Unitholders of
such Subseries D, (2) expenses and liabilities arising from transfer
agency services that the Board of Trustees may from time to time
determine are directly attributable to such Subseries D Units, and (3)
such other expenses, costs, charges and reserves as the Board of
Trustees may from time to time determine are directly attributable to
such Subseries D Units and which should therefore be borne solely by
such Units;
The expenses and liabilities set forth in subparagraphs (i), (ii),
(iii) and (iv) are sometimes referred to collectively as "special Subseries
liabilities" and individually as a "special Subseries liability";
(b) Dividends. Dividends and distributions on Units of a particular
----------
Subseries of the Additional Series may be paid to the holders of Units of
that Subseries after providing for any actual and accrued liabilities
belonging to that Series and any special Subseries liability with respect
to that Subseries. To the extent that the Trustees determine to pay such a
dividend or distribution which provides for a special Subseries liability
with respect to a particular Subseries, it shall be distributed pro rata to
the holders of that Subseries in proportion to the number of Units of that
Subseries held by them at the date and time of record established for the
payment of such dividend or distribution, except that in connection with
any dividends or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Units as to
which the Unitholder's purchase order and/or payment have not been received
by the time or times established by the Trustees under such program or
procedure;
(c) Liquidation. In the event of liquidation or dissolution of the
------------
Trust, the Unitholders of each Subseries of the Additional Series shall be
entitled to receive, as a Subseries, when and as declared by the Trustees,
the excess of the assets belonging to that Additional Series over the
liabilities belonging to that Series and any special Subseries liabilities
with respect to that Subseries. The assets so distributable to the
Unitholders of any particular Subseries of the Additional Series shall be
distributed among such Unitholders in proportion to the number of Units of
that Subseries held by them and recorded on the books of the Trust;
(d) Voting. On each matter submitted to a vote of the Unitholders,
-------
each holder of a Unit shall be entitled to one vote for each such Unit
standing in his name on the books of the Trust irrespective of the
particular Series or Subseries thereof and all Units of all Series and any
Subseries thereof shall vote as a single class ("Single Class Voting");
provided however, that (i) as to any matter with respect to which a
separate vote of any Series or Subseries of the Additional Series is
required by the 1940 Act or would be required under the Massachusetts
Business Corporation Law if the Trust were a Massachusetts business
corporation, such requirements as to a separate vote by that Series or
Subseries shall apply in lieu of Single Class Voting described above; (ii)
in the event that the separate vote requirements referred to in (i) above
apply with respect to one or more Series or Subseries, then, subject to
(iii) below, the Units of all other Series and any Subseries shall vote as
a single class; and (iii) as to any matter which does not affect the
interest of all Unitholders of the Additional Series thereof, only the
Unitholders of the one or more affected Subseries shall be entitled to
vote;
(e) Redemption by Unitholder. Each holder of Units of a particular
-------------------------
Subseries of the Additional Series shall have the right at such times as
may permitted by the Trust, but no less frequently than once each week, to
require the Trust to redeem all or any part of his Units of that Subseries
at a redemption price equal to the net asset value per Unit of that
Subseries next determined in accordance with paragraph (g) below after the
Units are properly tendered for
2
<PAGE>
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in securities
or other assets belonging to the Series of which the Units being redeemed
are a part at the value of such securities or assets used in such
determination of net asset value;
(f) Redemption by Trust. Each Unit of each Subseries of the
--------------------
Additional Series is subject to redemption by the Trust at the redemption
price which would be applicable if such Unit was then being redeemed by the
Unitholder pursuant to paragraph (e) above at any time if the Trustees
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Units, or any Series
or Subseries of a particular Additional Series thereof, of the Trust, and
upon such redemption the holders of the Units so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price. In addition, the Trustees, in their sole discretion, may
cause the Trust to redeem all of the Units of one or more Subseries of the
Additional Series held by (a) any Unitholder if the value of such Units
held by such Unitholder is less than the minimum amount established from
time to time by the Trustees or (b) all Unitholders if the value of such
Units held by all Unitholders is less than the minimum amount established
from time to time by the Trustees;
(g) Net Asset Value. The net asset value per Unit of a particular
----------------
Subseries of the Additional Series shall be the quotient obtained by
dividing the value of the net assets of that Subseries (being the assets
belonging to the Additional Series less the liabilities belonging to the
Series and less any special Subseries liabilities with respect to that
Subseries) by the total number of Units of that Subseries outstanding, all
determined in accordance with the methods and procedures, including without
limitation those with respect to rounding, established by the Trustees from
time to time;
(h) Equality. All Units of each Subseries of the Additional Series
---------
shall represent an equal proportionate interest in the assets belonging to
such Additional Series (subject to the liabilities belonging to that Series
and any special Subseries liabilities with respect to that Subseries), and
each Unit of any particular Subseries of the Additional Series shall be
equal to each other Unit of that Subseries. The Trustees may from time to
time divide or combine the Units of any particular Subseries of the
Additional Series into a greater or lesser number of Units of that
Subseries without thereby changing the proportionate beneficial interest in
the assets belonging to that Subseries or in any way affecting the rights
of Units of any other Series or Subseries; and
3
<PAGE>
(3) determines that pursuant to Section 7.3 of the Declaration the
foregoing amendments shall be effective as of January 22, 1997.
WITNESS our hands as of this 22nd day of January, 1997.
/s/ William H. Springer
--------------------------------------------------
William H. Springer
/s/ Edward J. Condon, Jr.
--------------------------------------------------
Edward J. Condon, Jr.
/s/ John W. English
--------------------------------------------------
John W. English
/s/ James J. Gavin
------------------------------------------------
James J. Gavin, Jr.
/s/ Frederick T. Kelsey
--------------------------------------------------
Frederick T. Kelsey
/s/ Richard P. Strubel
--------------------------------------------------
Richard P. Strubel
STATE OF ILLINOIS :
: SS.
COUNTY OF COOK :
Then personally appeared the above mentioned Trustees and acknowledged
this instrument to be their free act and deed this 22nd day of January, 1997.
/s/ Nancy James
--------------------------------------------------
Notary Public
My Commission Expires: 11-21-00
--------------------------
4
<PAGE>
THE BENCHMARK FUNDS
OFFICER'S CERTIFICATE
The undersigned, Michael J. Richman, the duly elected, appointed and
serving Secretary of The Benchmark Funds, hereby certifies that Amendment No. 15
to the Agreement and Declaration of Trust dated July 15, 1982 of The Benchmark
Funds, as previously amended, a copy of which is attached hereto, has been duly
adopted by the Board of Trustees of said entity and said Amendment No. 15 is
effective as of January 22, 1997.
Dated as of this 22nd day of January, 1997.
/s/ Howard B. Surloff
------------------------------------------------
Howard B. Surloff
Assistant Secretary of the Trust
STATE OF ILLINOIS :
: SS.
COUNTY OF COOK :
Then personally appeared the above-named Michael J. Richman and
acknowledged this instrument to be his free act and deed this 22nd day of
January, 1997.
/s/ Nancy James
------------------------------------------
Notary Public
My Commission expires:11-21-00
-----------------------
[Notarial Seal]
5
<PAGE>
EXHIBIT 1(p)
THE BENCHMARK FUNDS
AMENDMENT NO. 16 TO AGREEMENT AND DECLARATION OF TRUST
WHEREAS, Section 4.1 of the Agreement and Declaration of Trust dated July
15, 1982, as amended, (the "Declaration") of The Benchmark Funds (the "Trust")
provides that the Declaration may be amended to establish and designate new
Series of Units by an instrument in writing executed by a majority of the
Trustees of the Trust and setting forth such establishment and designation and
the relative rights and preferences of such Series;
NOW THEREFORE, the undersigned, being a majority of the Trustees of the
Trust hereby:
(1) amend the Declaration by designating and establishing an additional
Series of Units (the "Additional Series") to be known as "Intermediate Bond
Portfolio Units". Except as otherwise provided for below with respect to Units
of a particular Subseries of the Additional Series, all Units of the Additional
Series shall be identical and shall have the relative rights and preferences set
forth in Subsections (a) through (k) of Section 4.2 of the Declaration;
(2) amend the Declaration by designating and establishing four Subseries,
respectively Subseries A, B, C and D, within the Additional Series. Units of a
particular Subseries of the Additional Series shall also be Units of that Series
under the Declaration. Pursuant to Section 4.1 of the Declaration, Units of
each respective Subseries shall have the following relative rights and
preferences:
(a) Liabilities belonging to Subseries. Each Subseries of the
----------------------------------
Additional Series shall bear a pro rata portion of the "liabilities
belonging to" such Additional Series. In addition, to the extent permitted
by rule or order of the Securities and Exchange Commission and as may be
from time to time determined by the Board of Trustees (whether or not Units
of a particular Subseries affected are issued and outstanding):
(i) Subseries A Units of the Additional Series and no other
Subseries established hereby shall bear such expenses, costs, charges
and reserves as the Board of Trustees may from time to time determine
are directly attributable to such Units and which should therefore be
borne solely by such Units;
(ii) Subseries B Units of the Additional Series and no other
Subseries established hereby shall bear (1) the expenses and
liabilities of payments to institutions under any agreements entered
into by or on behalf of the Trust which expenses are incurred for
services by the institutions exclusively for beneficial Unitholders of
such Subseries B, (2) expenses and liabilities arising from transfer
agency services that the Board of Trustee may from time to time
determine are directly attributable to such Subseries B Units, and (3)
such other expenses, costs, charges and reserves as the Board of
Trustees may from time to time determine are directly attributable to
such Subseries B Units and which should therefore be borne solely by
such Units;
(iii) Subseries C Units of the Additional Series and no other
Subseries established hereby shall bear (1) the expenses and
liabilities of payments to institutions under any agreements entered
into by or on behalf of the Trust which expenses are incurred for
services by the institutions exclusively for beneficial Unitholders of
such Subseries C, (2) expenses and liabilities arising from transfer
agency services that the Board of Trustees may from time to time
determine are directly attributable to such Subseries C Units, and (3)
such other expenses, costs, charges and reserves as the Board of
Trustees may from time to time determine are directly attributable to
such Subseries C Units and which should therefore be borne solely by
such Units;
<PAGE>
(iv) Subseries D Units of the Additional Series and no other
Subseries established hereby shall bear (1) the expenses and
liabilities of payments to institutions under any agreements entered
into by or on behalf of the Trust which expenses are incurred for
services by the institutions exclusively for beneficial Unitholders of
such Subseries D, (2) expenses and liabilities arising from transfer
agency services that the Board of Trustees may from time to time
determine are directly attributable to such Subseries D Units, and (3)
such other expenses, costs, charges and reserves as the Board of
Trustees may from time to time determine are directly attributable to
such Subseries D Units and which should therefore be borne solely by
such Units;
The expenses and liabilities set forth in subparagraphs (i), (ii),
(iii) and (iv) are sometimes referred to collectively as "special Subseries
liabilities" and individually as a "special Subseries liability";
(b) Dividends. Dividends and distributions on Units of a particular
----------
Subseries of the Additional Series may be paid to the holders of Units of
that Subseries after providing for any actual and accrued liabilities
belonging to that Series and any special Subseries liability with respect
to that Subseries. To the extent that the Trustees determine to pay such a
dividend or distribution which provides for a special Subseries liability
with respect to a particular Subseries, it shall be distributed pro rata to
the holders of that Subseries in proportion to the number of Units of that
Subseries held by them at the date and time of record established for the
payment of such dividend or distribution, except that in connection with
any dividends or distribution program or procedure the Trustees may
determine that no dividend or distribution shall be payable on Units as to
which the Unitholder's purchase order and/or payment have not been received
by the time or times established by the Trustees under such program or
procedure;
(c) Liquidation. In the event of liquidation or dissolution of the
------------
Trust, the Unitholders of each Subseries of the Additional Series shall be
entitled to receive, as a Subseries, when and as declared by the Trustees,
the excess of the assets belonging to that Additional Series over the
liabilities belonging to that Series and any special Subseries liabilities
with respect to that Subseries. The assets so distributable to the
Unitholders of any particular Subseries of the Additional Series shall be
distributed among such Unitholders in proportion to the number of Units of
that Subseries held by them and recorded on the books of the Trust;
(d) Voting. On each matter submitted to a vote of the Unitholders,
-------
each holder of a Unit shall be entitled to one vote for each such Unit
standing in his name on the books of the Trust irrespective of the
particular Series or Subseries thereof and all Units of all Series and any
Subseries thereof shall vote as a single class ("Single Class Voting");
provided however, that (i) as to any matter with respect to which a
separate vote of any Series or Subseries of the Additional Series is
required by the 1940 Act or would be required under the Massachusetts
Business Corporation Law if the Trust were a Massachusetts business
corporation, such requirements as to a separate vote by that Series or
Subseries shall apply in lieu of Single Class Voting described above; (ii)
in the event that the separate vote requirements referred to in (i) above
apply with respect to one or more Series or Subseries, then, subject to
(iii) below, the Units of all other Series and any Subseries shall vote as
a single class; and (iii) as to any matter which does not affect the
interest of all Unitholders of the Additional Series thereof, only the
Unitholders of the one or more affected Subseries shall be entitled to
vote;
(e) Redemption by Unitholder. Each holder of Units of a particular
-------------------------
Subseries of the Additional Series shall have the right at such times as
may permitted by the Trust, but no less frequently than once each week, to
require the Trust to redeem all or any part of his Units of that Subseries
at a redemption price equal to the net asset value per Unit of that
Subseries next determined in accordance with paragraph (g) below after the
Units are properly tendered for
2
<PAGE>
redemption. Payment of the redemption price shall be in cash; provided,
however, that if the Trustees determine, which determination shall be
conclusive, that conditions exist which make payment wholly in cash unwise
or undesirable, the Trust may make payment wholly or partly in securities
or other assets belonging to the Series of which the Units being redeemed
are a part at the value of such securities or assets used in such
determination of net asset value;
(f) Redemption by Trust. Each Unit of each Subseries of the
--------------------
Additional Series is subject to redemption by the Trust at the redemption
price which would be applicable if such Unit was then being redeemed by the
Unitholder pursuant to paragraph (e) above at any time if the Trustees
determine in their sole discretion that failure to so redeem may have
materially adverse consequences to the holders of the Units, or any Series
or Subseries of a particular Additional Series thereof, of the Trust, and
upon such redemption the holders of the Units so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price. In addition, the Trustees, in their sole discretion, may
cause the Trust to redeem all of the Units of one or more Subseries of the
Additional Series held by (a) any Unitholder if the value of such Units
held by such Unitholder is less than the minimum amount established from
time to time by the Trustees or (b) all Unitholders if the value of such
Units held by all Unitholders is less than the minimum amount established
from time to time by the Trustees;
(g) Net Asset Value. The net asset value per Unit of a particular
----------------
Subseries of the Additional Series shall be the quotient obtained by
dividing the value of the net assets of that Subseries (being the assets
belonging to the Additional Series less the liabilities belonging to the
Series and less any special Subseries liabilities with respect to that
Subseries) by the total number of Units of that Subseries outstanding, all
determined in accordance with the methods and procedures, including without
limitation those with respect to rounding, established by the Trustees from
time to time;
(h) Equality. All Units of each Subseries of the Additional Series
---------
shall represent an equal proportionate interest in the assets belonging to
such Additional Series (subject to the liabilities belonging to that Series
and any special Subseries liabilities with respect to that Subseries), and
each Unit of any particular Subseries of the Additional Series shall be
equal to each other Unit of that Subseries. The Trustees may from time to
time divide or combine the Units of any particular Subseries of the
Additional Series into a greater or lesser number of Units of that
Subseries without thereby changing the proportionate beneficial interest in
the assets belonging to that Subseries or in any way affecting the rights
of Units of any other Series or Subseries; and
3
<PAGE>
(3) determines that pursuant to Section 7.3 of the Declaration the
foregoing amendments shall be effective as of April 22, 1997.
WITNESS our hands as of this 22nd day of April, 1997.
/s/ William H. Springer
------------------------------------------
William H. Springer
/s/ Edward J. Condon, Jr.
------------------------------------------
Edward J. Condon, Jr.
/s/ John W. English
------------------------------------------
John W. English
/s/ James J. Gavin, Jr.
------------------------------------------
James J. Gavin, Jr.
/s/ Frederick T. Kelsey
------------------------------------------
Frederick T. Kelsey
/s/ Richard P. Strubel
------------------------------------------
Richard P. Strubel
STATE OF ILLINOIS :
: SS.
COUNTY OF COOK :
Then personally appeared the above mentioned Trustees and acknowledged
this instrument to be their free act and deed this 22nd day of April, 1997.
/s/ Nancy James
-----------------------------------------
Notary Public
My Commission Expires: 11-21-00
-------------------
4
<PAGE>
THE BENCHMARK FUNDS
OFFICER'S CERTIFICATE
The undersigned, Michael J. Richman, the duly elected, appointed and
serving Secretary of The Benchmark Funds, hereby certifies that Amendment No. 16
to the Agreement and Declaration of Trust dated July 15, 1982 of The Benchmark
Funds, as previously amended, a copy of which is attached hereto, has been duly
adopted by the Board of Trustees of said entity and said Amendment No. 16 is
effective as of April 22, 1997.
Dated as of this 22nd day of April, 1997.
/s/ Michael J. Richman
-----------------------------------------
Michael J. Richman
Secretary of the Trust
STATE OF ILLINOIS :
: SS.
COUNTY OF COOK :
Then personally appeared the above-named Michael J. Richman and
acknowledged this instrument to be his free act and deed this 22nd day of April,
1997.
/s/ Nancy James
---------------------------------------
Notary Public
My Commission expires:11-21-00
------------------------
[Notarial Seal]
5
<PAGE>
EXHIBIT 5(f)
THE BENCHMARK FUNDS
ADDENDUM NO. 5 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the 22nd day of January, 1997, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY (the "Investment Adviser"), an Illinois state bank.
WHEREAS, the Trust and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of October 5, 1990 as amended by Addendum
No. 1 dated June 8, 1992, Addendum No. 2 dated January 8, 1993, Addendum No. 3
dated July 1, 1993 and Addendum No. 4 dated March 25, 1994 (the "Advisory
Agreement"), pursuant to which the Trust appointed the Investment Adviser to act
as investment adviser to the Trust for the Diversified Assets Portfolio,
Government Portfolio, Government Select Portfolio, Tax-Exempt Portfolio, Short
Duration Portfolio, U.S. Treasury Index Portfolio, U.S. Government Securities
Portfolio, Short-Intermediate Bond Portfolio, Bond Portfolio, Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth Portfolio, Focused
Growth Portfolio, Balanced Portfolio, International Growth Portfolio and
International Bond Portfolio;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Trust establishes one or more additional investment portfolios with respect
to which it desires to retain the Investment Adviser to act as investment
adviser under the Advisory Agreement, the Trust shall so notify the Investment
Adviser in writing and if the Investment Adviser is willing to render such
services it shall notify the Trust in writing, and the compensation to be paid
to the Investment Adviser shall be that which is agreed to in writing by the
Trust and the Investment Adviser; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Trust has
notified the Investment Adviser that it is establishing the International Equity
Index Portfolio (the "Portfolio"), and that it desires to retain the Investment
Adviser to act as the investment adviser therefor, and the Investment Adviser
has notified the Trust that it is willing to serve as investment adviser for the
Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
-----------
as investment adviser to the Trust for the Portfolio for the period
and on the terms set forth in the Advisory Agreement. The Investment
Adviser hereby accepts such appointment and agrees to render the
services set forth in the Advisory Agreement for the compensation
herein provided.
2. Duties. The Investment Adviser shall perform the following duties
------
with respect to common and preferred stocks of the Portfolio in lieu
of clauses (ii) and (iii) of paragraph 3(a) of the Advisory Agreement:
(a) The Investment Adviser shall place orders pursuant to its
determination either directly with the issuer or with any broker
and/or dealer or other persons who deal in the securities in which the
Portfolio in question is trading. In executing portfolio transactions
and selecting brokers or dealers, the Investment Adviser shall
use its best judgment to obtain the best overall terms available. In
assessing the best overall terms available for any transaction, the
Adviser shall consider all factors it deems relevant, including the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer,
and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best
overall terms available and in selecting the broker or dealer to
execute a particular transaction, the Adviser may also
1
<PAGE>
consider the brokerage and research services (as those terms are
defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to any Portfolio and/or other accounts over which the Adviser
and/or an affiliate of the Adviser exercises investment discretion;
(b) The Investment Adviser may, on occasions when it deems the
purchase or sale of a security to be in the best interests of a
Portfolio as well as other fiduciary or agency accounts managed by the
Investment Adviser, aggregate, to the extent permitted by applicable
laws and regulations, the securities to be sold or purchased in order
to obtain best overall terms available execution. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Investment
Adviser in the manner it considers to be most equitable and consistent
with its fiduciary obligations to such Portfolio and to such other
accounts.
3. Compensation. For the services provided and the expenses assumed
------------
pursuant to the Advisory Agreement, the Trust will pay the Investment
Adviser, and the Investment Adviser will accept as full compensation
therefor from the Trust, a fee at an annual rate of 50% of average net
assets for International Equity Index Portfolio. The fee will be
computed based on net assets on each day and will be paid to the
Investment Adviser monthly. Such fee as is attributable to the
Portfolio shall be a separate charge to such Portfolio and shall be
the several (and not joint or joint and several) obligation of the
Portfolio.
4. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Advisory Agreement shall be deemed to
include the International Equity Index Portfolio. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed
to them in the Advisory Agreement.
5. Miscellaneous. Except to the extent supplemented hereby, the Advisory
-------------
Agreement shall remain unchanged and in full force and effect, and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest:/s/ Nancy James By: /s/ Nancy L. Mucker
-------------------- ----------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest:__________________________ By: /s/ Thomas L. Mallman
----------------------------------
Name: Thomas L. Mallman
[Corporate Seal] Title: Senior Vice President
2
<PAGE>
EXHIBIT 5(g)
THE BENCHMARK FUNDS
ADDENDUM NO. 6 TO THE INVESTMENT ADVISORY AGREEMENT
---------------------------------------------------
This Addendum, dated as of the 22nd day of April, 1997, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY (the "Investment Adviser"), an Illinois state bank.
WHEREAS, the Trust and the Investment Adviser have entered into an
Investment Advisory Agreement dated as of October 5, 1990 as amended by Addendum
No. 1 dated June 8, 1992, Addendum No. 2 dated January 8, 1993, Addendum No. 3
dated July 1, 1993, Addendum No. 4 dated March 25, 1994 and Addendum No. 5 dated
January 22, 1997 (the "Advisory Agreement"), pursuant to which the Trust
appointed the Investment Adviser to act as investment adviser to the Trust for
the Diversified Assets Portfolio, Government Portfolio, Government Select
Portfolio, Tax-Exempt Portfolio, Short Duration Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short-Intermediate Bond
Portfolio, Bond Portfolio, Equity Index Portfolio, Small Company Index
Portfolio, Diversified Growth Portfolio, Focused Growth Portfolio, Balanced
Portfolio, International Growth Portfolio, International Bond Portfolio and
International Equity Index Portfolio;
WHEREAS, Section 1(b) of the Advisory Agreement provides that in the event
the Trust establishes one or more additional investment portfolios with respect
to which it desires to retain the Investment Adviser to act as investment
adviser under the Advisory Agreement, the Trust shall so notify the Investment
Adviser in writing and if the Investment Adviser is willing to render such
services it shall notify the Trust in writing, and the compensation to be paid
to the Investment Adviser shall be that which is agreed to in writing by the
Trust and the Investment Adviser; and
WHEREAS, pursuant to Section 1(b) of the Advisory Agreement, the Trust has
notified the Investment Adviser that it is establishing the Intermediate Bond
Portfolio (the "Portfolio"), and that it desires to retain the Investment
Adviser to act as the investment adviser therefor, and the Investment Adviser
has notified the Trust that it is willing to serve as investment adviser for the
Portfolio;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to act
-----------
as investment adviser to the Trust for the Portfolio for the period
and on the terms set forth in the Advisory Agreement. The Investment
Adviser hereby accepts such appointment and agrees to render the
services set forth in the Advisory Agreement for the compensation
herein provided.
2. Duties. The Investment Adviser shall perform the following duties
------
with respect to common and preferred stocks of the Portfolio in lieu
of clauses (ii) and (iii) of paragraph 3(a) of the Advisory Agreement:
(a) The Investment Adviser shall place orders pursuant to its
determination either directly with the issuer or with any broker
and/or dealer or other persons who deal in the securities in which the
Portfolio in question is trading. In executing portfolio transactions
and selecting brokers or dealers, the Investment Adviser shall
use its best judgment to obtain the best overall terms available. In
assessing the best overall terms available for any transaction, the
Adviser shall consider all factors it deems relevant, including the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of the broker or dealer,
and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best
overall terms available and in
1
<PAGE>
selecting the broker or dealer to execute a particular transaction,
the Adviser may also consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to any Portfolio and/or other accounts over
which the Adviser and/or an affiliate of the Adviser exercises
investment discretion;
(b) The Investment Adviser may, on occasions when it deems the
purchase or sale of a security to be in the best interests of a
Portfolio as well as other fiduciary or agency accounts managed by the
Investment Adviser, aggregate, to the extent permitted by applicable
laws and regulations, the securities to be sold or purchased in order
to obtain best overall terms available execution. In such event,
allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Investment
Adviser in the manner it considers to be most equitable and consistent
with its fiduciary obligations to such Portfolio and to such other
accounts.
3. Compensation. For the services provided and the expenses assumed
------------
pursuant to the Advisory Agreement, the Trust will pay the Investment
Adviser, and the Investment Adviser will accept as full compensation
therefor from the Trust, a fee at an annual rate of ________% of
average net assets for the Intermediate Bond Portfolio. The fee will
be computed based on net assets on each day and will be paid to the
Investment Adviser monthly. Such fee as is attributable to the
Portfolio shall be a separate charge to such Portfolio and shall be
the several (and not joint or joint and several) obligation of the
Portfolio.
4. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Advisory Agreement shall be deemed to
include the Intermediate Bond Portfolio. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to
them in the Advisory Agreement.
5. Miscellaneous. Except to the extent supplemented hereby, the Advisory
-------------
Agreement shall remain unchanged and in full force and effect, and is
hereby ratified and confirmed in all respects as supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest:__________________________ By:______________________________
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest:__________________________ By:______________________________
Name:
[Corporate Seal] Title:
2
<PAGE>
Exhibit 6(d)
ADDENDUM NO. 4 TO THE DISTRIBUTION AGREEMENT
--------------------------------------------
This Addendum No. 4, dated as of the 22nd day of January, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO., a New York limited partnership (the "Distributor").
WHEREAS, the Trust and the Distributor have entered into a Distribution
Agreement dated as of June 8, 1992, as amended by Addendum No. 1 dated January
8, 1993, Addendum No. 2 dated July 1, 1993 and Addendum No. 3 dated March 25,
1994 (the "Distribution Agreement"), pursuant to which the Trust appointed the
Distributor to act as distributor to the Trust for the Diversified Assets
Portfolio, the Government Portfolio, the Tax-Exempt Portfolio, the Government
Securities Portfolio, the Short Duration Portfolio, Equity Index Portfolio,
Small Company Index Portfolio, Diversified Growth Portfolio, Focused Growth
Portfolio, U.S. Treasury Index Portfolio, U.S. Government Securities Portfolio,
Short-Intermediate Bond Portfolio, Bond Portfolio, Balanced Portfolio,
International Growth Portfolio and International Bond Portfolio;
WHEREAS, the Trust is establishing the International Equity Index Portfolio
(the "Portfolio"), and it desires to retain the Distributor to act as
distributor to provide for the sale and distribution of the Units of the
Portfolio and the Distributor is willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Distributor as exclusive
------------
distributor of the Units of the Portfolio on the terms and for the
periods set forth in the Distribution Agreement. The Distributor
hereby accepts such appointment and agrees to render the services and
perform the duties set forth in the Distribution Agreement without
compensation.
2. Capitalized Terms. From and after the date hereof, the term
------------------
"Portfolios" as used in the Distribution Agreement shall be deemed to
include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified Growth Portfolio, Focused Growth Portfolio, U.S. Treasury
Index Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio, Bond Portfolio, Balanced Portfolio,
International Growth Portfolio, International Bond Portfolio and
International Equity Index Portfolio. Capitalized terms used herein
and not otherwise defined shall have the meanings ascribed to them in
the Distribution Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
--------------
Distribution Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest:/s/ Nancy James By: /s/ Nancy L. Mucker
---------------------------- ---------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
Attest:_____________________ By: /s/ John L. McNulty
---------------------------------
Name:
Title:
<PAGE>
Exhibit 6(e)
ADDENDUM NO. 5 TO THE DISTRIBUTION AGREEMENT
--------------------------------------------
This Addendum No. 5, dated as of the 22nd day of April, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO., a New York limited partnership (the "Distributor").
WHEREAS, the Trust and the Distributor have entered into a Distribution
Agreement dated as of June 8, 1992, as amended by Addendum No. 1 dated January
8, 1993, Addendum No. 2 dated July 1, 1993, Addendum No. 3 dated March 25, 1994
and Addendum No. 4 dated January 22, 1997 (the "Distribution Agreement"),
pursuant to which the Trust appointed the Distributor to act as distributor to
the Trust for the Diversified Assets Portfolio, the Government Portfolio, the
Tax-Exempt Portfolio, the Government Securities Portfolio, the Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio, Diversified
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index Portfolio, U.S.
Government Securities Portfolio, Short-Intermediate Bond Portfolio, Bond
Portfolio, Balanced Portfolio, International Growth Portfolio, International
Bond Portfolio and International Equity Index Portfolio;
WHEREAS, the Trust is establishing the Intermediate Bond Portfolio (the
"Portfolio"), and it desires to retain the Distributor to act as distributor to
provide for the sale and distribution of the Units of the Portfolio and the
Distributor is willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Distributor as exclusive
------------
distributor of the Units of the Portfolio on the terms and for the
periods set forth in the Distribution Agreement. The Distributor
hereby accepts such appointment and agrees to render the services and
perform the duties set forth in the Distribution Agreement without
compensation.
2. Capitalized Terms. From and after the date hereof, the term
------------------
"Portfolios" as used in the Distribution Agreement shall be deemed to
include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified Growth Portfolio, Focused Growth Portfolio, U.S. Treasury
Index Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio, Bond Portfolio, Balanced Portfolio,
International Growth Portfolio, International Bond Portfolio,
International Equity Index Portfolio and Intermediate Bond Portfolio.
Capitalized terms used herein and not otherwise defined shall have the
meanings ascribed to them in the Distribution Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
--------------
Distribution Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest:____________________ By:
---------------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
Attest:_____________________ By:
--------------------------------------
Name:
Title:
<PAGE>
Exhibit 8(c)
THE BENCHMARK FUNDS
ADDENDUM NO. 3 TO THE CUSTODIAN AGREEMENT
-----------------------------------------
This Addendum, dated as of the 8th day of October, 1996, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY, an Illinois state bank ("Northern").
WHEREAS, the Trust and Northern are parties to a Custodian Agreement dated
as of January 8, 1993, and thereafter amended (the "Custodian Agreement"),
pursuant to which the Trust has appointed Northern to act as custodian to the
Trust for the Government Select, Government, Diversified Assets, Tax-Exempt,
Short-Duration, U.S. Government Securities, Short-Intermediate Bond, U.S.
Treasury Index, Bond, Balanced, Equity Index, Diversified Growth, Focused Growth
and Small Company Index Portfolios (collectively, the "Portfolios"); and
WHEREAS, the Trust and Northern wish to clarify their agreement with
respect to the custody of foreign securities held by the Portfolios.
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Custody of Foreign Securities. "Foreign securities", as defined in
-----------------------------
paragraph (c)(1) of Rule 17f-5 under the Investment Company Act of
1940, owned by the Portfolios shall be held by Northern, or by an
agent or sub-custodian, in accordance with the provisions of the
Foreign Custody Agreement dated March 1, 1994 between the Trust and
Northern, and the provisions of said Foreign Custody Agreement shall
apply to the custody of said foreign securities; except that the Trust
shall pay the fees and expenses set forth in Exhibit A to the
Custodian Agreement with respect to said foreign securities.
2. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Custodian Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: /s/ Nancy James By: /s/ Nancy L. Mucker
----------------------- ----------------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest: /s/ Victoria Antoni By: /s/ Roger W. Kushla
----------------------- -------------------------------------
Name:
Title:
<PAGE>
Exhibit 8(d)
THE BENCHMARK FUNDS
ADDENDUM NO. 4 TO THE CUSTODIAN AGREEMENT
-----------------------------------------
This Addendum No. 4, dated as of the 22nd day of April, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and THE NORTHERN TRUST COMPANY, an Illinois state bank ("Northern").
WHEREAS, the Trust and Northern have entered into a Custodian Agreement
dated June 8, 1992, as amended by Addendum No. 1 dated January 8, 1993, Addendum
No. 2 dated July 1, 1993 and Addendum No. 3 dated October 8, 1996 pursuant to
which the Trust has appointed Northern to act as custodian to the Trust for its
Diversified Assets Portfolio, Government Portfolio, Government Select Portfolio,
Tax-Exempt Portfolio, Short Duration Portfolio, Equity Index Portfolio, Small
Company Index Portfolio, Diversified Growth Portfolio, Focused Growth Portfolio,
U.S. Treasury Index Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio, Bond Portfolio and Balanced Portfolio
(collectively, the "Portfolios"); and
WHEREAS, the Trust is establishing the Intermediate Bond Portfolio (the
"Portfolio"), and it desires to retain Northern to act as the custodian
therefor, and Northern is willing to so act; and
WHEREAS, the parties hereto desire to enter into this Addendum No. 4 to
modify and restate in its entirety paragraph 3 of Addendum No. 2 and to make
certain other changes in such agreement;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints Northern custodian to the
-----------
Trust for the Portfolio for the period and on the terms set forth in
the Custodian Agreement. Northern hereby accepts such appointment and
agrees to render the services set forth in the Custodian Agreement for
the compensation therein provided.
2. Paragraph 2 of Addendum No. 2 to the aforesaid Custodian Agreement is
modified and restated in its entirety as follows:
Segregated Accounts.
-------------------
(a) Northern shall upon receipt of Proper Instructions establish
and maintain a segregated account or accounts on its records for and
on behalf of each Portfolio of the Trust, into which account or
accounts may be transferred cash and/or securities,
1
<PAGE>
including securities in the Book-Entry System (i) for the purposes of
compliance by the Trust with the procedures required by a securities
or option exchange, providing such procedures comply with the
Investment Company Act of 1940 and Release No. 10666 or any subsequent
release or releases of the Securities and Exchange Commission ("SEC")
relating to the maintenance of segregated accounts by registered
investment companies, and (ii) for other proper corporate purposes,
but only, in the case of clause (ii), upon receipt of Proper
Instructions.
(b) Northern may enter into separate procedural, safekeeping or
other agreements with various futures commission merchant ("FCMs") and
banks that are unaffiliated with the Trust (each a "Safekeeping
Arrangement"), pursuant to which the banks will act as the Trust's
custodian with respect to the Trust's margin deposits in transactions
involving futures contracts and options on futures contracts. Such
margin deposits will be held in segregated accounts (each an "FCM
Account") subject to the disposition by the FCM involved in accordance
with the customer contract between FCM and the Trust ("FCM Contract"),
SEC rules governing such segregated accounts, CFTC rules and the rules
of the applicable commodities exchange. Transfers of initial and
variation margin and premiums shall be made from the Trust's custodial
accounts under the Custodian Agreement upon Proper Instructions.
3. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Custodian Agreement shall be deemed to
include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified Growth Portfolio, Focused Growth Portfolio, U.S. Treasury
Index Portfolio, U.S. Government Securities Portfolio, Short-
Intermediate Bond Portfolio, Balanced Portfolio and Intermediate Bond
Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Custodian Agreement.
2
<PAGE>
4. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Custodian Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: ______________ By: _________________________
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest: ______________ By: _________________________
Name:
Title:
3
<PAGE>
Exhibit 8(f)
THE BENCHMARK FUNDS
ADDENDUM NO.1 TO THE FOREIGN CUSTODY AGREEMENT
----------------------------------------------
This Addendum No. 1, dated as of the 22nd day of January, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and THE NORTHERN TRUST COMPANY, an Illinois state bank ("Northern").
WHEREAS, the Trust and Northern have entered into a Foreign Custody
Agreement dated March 1, 1994 (the "Foreign Custody Agreement"), pursuant to
which the Trust has appointed Northern to act as custodian to the Trust for its
International Growth Portfolio and International Bond Portfolio (collectively,
the "Portfolios"); and
WHEREAS, the Trust is establishing the International Equity Index Portfolio
(the "New Portfolio"), and it desires to retain Northern to act as the custodian
therefor under the Foreign Custody Agreement, and Northern is willing to so act;
and
WHEREAS, the Trust and Northern wish to amend the Foreign Custody Agreement
to provide for its annual continuance for periods ending on April 30; and
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints Northern custodian to the
-----------
Trust for the New Portfolio for the period and on the terms set forth
in the Foreign Custody Agreement. Northern hereby accepts such
appointment and agrees to render the services set forth in the Foreign
Custody Agreement for the compensation therein provided.
2. Annual Continuance. The date "February 29, 1996" that appears in
------------------
Section 13 of the Foreign Custody Agreement is hereby changed to
"April 30, 1998".
3. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Foreign Custody Agreement shall be deemed
to include the International Growth Portfolio, International Bond
Portfolio and International Equity Index Portfolio. Capitalized terms
used herein and not otherwise defined shall have the meanings ascribed
to them in the Foreign Custody Agreement.
4. Miscellaneous. Except to the extent supplemented hereby, the Foreign
-------------
Custody Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest:/s/ Nancy James By: /s/ Nancy L. Mucker
------------------------ ---------------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest: /s/ James D. Grain By: /s/ Thomas L. Mallman
----------------------- ---------------------------------------
Name:
Title:
<PAGE>
Exhibit 9(d)
THE BENCHMARK FUNDS
ADDENDUM NO. 3 TO THE REVISED
AND RESTATED TRANSFER AGENCY AGREEMENT
--------------------------------------
This Addendum, dated as of the 22nd day of January, 1997, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY, an Illinois state bank (the "Transfer Agent").
WHEREAS, the Trust and the Transfer Agent have entered into a Revised and
Restated Transfer Agency Agreement dated as of January 8, 1993, Addendum No. 1
dated July 1, 1993 and Addendum No. 2 dated March 25, 1994 (the "Transfer Agency
Agreement"), pursuant to which the Trust appointed the Transfer Agent to act as
transfer agent with respect to each Class of Units in the Diversified Assets
Portfolio, the Government Portfolio, the Tax-Exempt Portfolio, the Government
Securities Portfolio, the Short Duration Portfolio, the Equity Index Portfolio,
Small Company Index Portfolio, Diversified Growth Portfolio, Focused Growth
Portfolio, U.S. Treasury Index Portfolio, U.S. Government Securities Portfolio,
Short-Intermediate Bond Portfolio, Bond Portfolio, Balanced Portfolio,
International Growth Portfolio and International Bond Portfolio;
WHEREAS, the Trust is establishing the International Equity Index Portfolio
(the "Portfolio"), and it desires to retain the Transfer Agent to render
transfer agency and other services with respect to the Portfolio and each Class
of Units within the Portfolio and the record and/or beneficial owners thereof,
and the Transfer Agent is willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Transfer Agent as transfer
------------
agent with respect to the Portfolio and each Class of Units thereof on
the terms and for the periods set forth in the Transfer Agency
Agreement. The Transfer Agent hereby accepts such appointment and
agrees to render the services and perform the duties set forth in the
Transfer Agency Agreement for the compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term "Current
------------------
Portfolios" as used in the Transfer Agency Agreement shall be deemed
to include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified
1
<PAGE>
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short-Intermediate
Bond Portfolio, Bond Portfolio, Balanced Portfolio, International
Growth Portfolio, International Bond Portfolio and International
Equity Index Portfolio; and the term "Non-Money Market Portfolios" as
used in the Transfer Agency Agreement shall be deemed to include the
Equity Index Portfolio, Small Company Index Portfolio, Diversified
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short-Intermediate
Bond Portfolio, Bond Portfolio, Balanced Portfolio, International
Growth Portfolio, International Bond Portfolio and International
Equity Index Portfolio. Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to them in the
Transfer Agency Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the Transfer
--------------
Agency Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest: /s/ Nancy James By: /s/ Nancy L. Mucker
-------------------------- -------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest:_________________________ By: /s/ Thomas L. Mallman
-------------------------------
Name:
[SEAL] Title:
2
<PAGE>
Exhibit 9(e)
THE BENCHMARK FUNDS
ADDENDUM NO. 4 TO THE REVISED
AND RESTATED TRANSFER AGENCY AGREEMENT
--------------------------------------
This Addendum, dated as of the 22nd day of April, 1997, is entered into
between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust, and
THE NORTHERN TRUST COMPANY, an Illinois state bank (the "Transfer Agent").
WHEREAS, the Trust and the Transfer Agent have entered into a Revised and
Restated Transfer Agency Agreement dated as of January 8, 1993, Addendum No. 1
dated July 1, 1993, Addendum No. 2 dated March 25, 1994 and Addendum No. 3 dated
January 22, 1997 (the "Transfer Agency Agreement"), pursuant to which the Trust
appointed the Transfer Agent to act as transfer agent with respect to each Class
of Units in the Diversified Assets Portfolio, the Government Portfolio, the Tax-
Exempt Portfolio, the Government Securities Portfolio, the Short Duration
Portfolio, the Equity Index Portfolio, Small Company Index Portfolio,
Diversified Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short-Intermediate Bond
Portfolio, Bond Portfolio, Balanced Portfolio, International Growth Portfolio,
International Bond Portfolio and International Equity Index Portfolio;
WHEREAS, the Trust is establishing the Intermediate Bond Portfolio (the
"Portfolio"), and it desires to retain the Transfer Agent to render transfer
agency and other services with respect to the Portfolio and each Class of Units
within the Portfolio and the record and/or beneficial owners thereof, and the
Transfer Agent is willing to render such services;
NOW THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
1. Appointment. The Trust hereby appoints the Transfer Agent as transfer
------------
agent with respect to the Portfolio and each Class of Units thereof on
the terms and for the periods set forth in the Transfer Agency
Agreement. The Transfer Agent hereby accepts such appointment and
agrees to render the services and perform the duties set forth in the
Transfer Agency Agreement for the compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term "Current
------------------
Portfolios" as used in the Transfer Agency Agreement shall be deemed
to include the Diversified Assets Portfolio, Government Portfolio,
Government Select Portfolio, Tax-Exempt Portfolio, Short Duration
Portfolio, Equity Index Portfolio, Small Company Index Portfolio,
Diversified
1
<PAGE>
Growth Portfolio, Focused Growth Portfolio, U.S. Treasury Index
Portfolio, U.S. Government Securities Portfolio, Short-Intermediate
Bond Portfolio, Bond Portfolio, Balanced Portfolio, International
Growth Portfolio, International Bond Portfolio, International Equity
Index Portfolio and Intermediate Bond Portfolio; and the term "Non-
Money Market Portfolios" as used in the Transfer Agency Agreement
shall be deemed to include the Equity Index Portfolio, Small Company
Index Portfolio, Diversified Growth Portfolio, Focused Growth
Portfolio, U.S. Treasury Index Portfolio, U.S. Government Securities
Portfolio, Short-Intermediate Bond Portfolio, Bond Portfolio, Balanced
Portfolio, International Growth Portfolio, International Bond
Portfolio, International Equity Index Portfolio and Intermediate Bond
Portfolio. Capitalized terms used herein and not otherwise defined
shall have the meanings ascribed to them in the Transfer Agency
Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the Transfer
--------------
Agency Agreement shall remain unchanged and in full force and effect,
and is hereby ratified and confirmed in all respects as supplemented
hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum as of the
date and year first above written.
THE BENCHMARK FUNDS
Attest:_________________________ By:
---------------------------------
Name:
Title:
THE NORTHERN TRUST COMPANY
Attest:_________________________ By:
---------------------------------
Name:
[SEAL] Title:
2
<PAGE>
Exhibit 9(k)
THE BENCHMARK FUNDS
ADDENDUM NO. 4 TO THE ADMINISTRATION AGREEMENT
----------------------------------------------
This Addendum, dated as of the 22nd day of January, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO., a New York Partnership (the "Administrator").
WHEREAS, the Trust and the Administrator have entered into an
Administration Agreement dated as of June 8, 1992, as amended by Addendum No. 1
dated January 8, 1993, Addendum No. 2 dated July 1, 1993 and Addendum No. 3
dated March 25, 1994, (the "Administration Agreement"), pursuant to which the
Trust appointed the Administrator to act as administrator to the Trust for the
Diversified Assets Portfolio, Government Portfolio, Government Select Portfolio,
Tax-Exempt Portfolio, U.S. Treasury Index Portfolio, Short-Intermediate Bond
Portfolio, Bond Portfolio, Equity Index Portfolio, Small Company Index
Portfolio, Diversified Growth Portfolio, U.S. Government Securities Portfolio,
Short Duration Portfolio, Focused Growth Portfolio, Balanced Portfolio,
International Growth Portfolio and International Bond Portfolio;
WHEREAS, the Trust is establishing the International Equity Index
Portfolio (the "Portfolio"), and it desires to retain the Administrator to act
as administrator of the Trust for the Portfolio and the Administrator is willing
to so act;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment The Trust hereby appoints the Administrator as
-----------
administrator of the Trust for the Portfolio on the terms and for the
periods set forth in the Administration Agreement. The Administrator
hereby accepts such appointment and agrees to render the services and
perform the duties set forth in the Administration Agreement for the
compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Administration Agreement shall be deemed
to include the International Equity Index Portfolio. Capitalized
terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Administration Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Administration Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum
as of the date and year first above written.
THE BENCHMARK FUNDS
Attest:/s/ Nancy James By: /s/ Nancy L. Mucker
-------------------------- -----------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
Attest:_________________________ By: /s/ John L. McNulty
-----------------------------------
Name:
Title:
<PAGE>
Exhibit 9(l)
THE BENCHMARK FUNDS
ADDENDUM NO. 5 TO THE ADMINISTRATION AGREEMENT
----------------------------------------------
This Addendum, dated as of the 22nd day of April, 1997, is entered
into between THE BENCHMARK FUNDS (the "Trust"), a Massachusetts business trust,
and GOLDMAN, SACHS & CO., a New York Partnership (the "Administrator").
WHEREAS, the Trust and the Administrator have entered into an
Administration Agreement dated as of June 8, 1992, as amended by Addendum No. 1
dated January 8, 1993, Addendum No. 2 dated July 1, 1993, Addendum No. 3 dated
March 25, 1994 and Addendum No. 4 dated January 22, 1997 (the "Administration
Agreement"), pursuant to which the Trust appointed the Administrator to act as
administrator to the Trust for the Diversified Assets Portfolio, Government
Portfolio, Government Select Portfolio, Tax-Exempt Portfolio, U.S. Treasury
Index Portfolio, Short-Intermediate Bond Portfolio, Bond Portfolio, Equity Index
Portfolio, Small Company Index Portfolio, Diversified Growth Portfolio, U.S.
Government Securities Portfolio, Short Duration Portfolio, Focused Growth
Portfolio, Balanced Portfolio, International Growth Portfolio International Bond
Portfolio and International Equity Index Portfolio;
WHEREAS, the Trust is establishing the Intermediate Bond Portfolio
(the "Portfolio"), and it desires to retain the Administrator to act as
administrator of the Trust for the Portfolio and the Administrator is willing to
so act;
NOW THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Appointment The Trust hereby appoints the Administrator as
-----------
administrator of the Trust for the Portfolio on the terms and for the
periods set forth in the Administration Agreement. The Administrator
hereby accepts such appointment and agrees to render the services and
perform the duties set forth in the Administration Agreement for the
compensation therein provided.
2. Capitalized Terms. From and after the date hereof, the term
-----------------
"Portfolios" as used in the Administration Agreement shall be deemed
to include the Intermediate Bond Portfolio. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to
them in the Administration Agreement.
3. Miscellaneous. Except to the extent supplemented hereby, the
-------------
Administration Agreement shall remain unchanged and in full force and
effect, and is hereby ratified and confirmed in all respects as
supplemented hereby.
IN WITNESS WHEREOF, the undersigned have executed this Addendum
as of the date and year first above written.
THE BENCHMARK FUNDS
Attest:_________________________
By:_____________________________
Name:
Title:
GOLDMAN, SACHS & CO.
Attest:_________________________
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT 9(m)
THE BENCHMARK FUNDS
AMENDED AND RESTATED ADMINISTRATION AGREEMENT
AGREEMENT made this 8th day of June, 1992, as amended and restated on
May 1, 1997 between THE BENCHMARK FUNDS, a Massachusetts business trust (the
"Trust"), and GOLDMAN, SACHS & CO., a New York limited partnership (the
"Administrator").
WITNESSETH:
----------
WHEREAS, the Trust is an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust is authorized to issue units of beneficial interest
("Units") in separate series with each such series representing the interests in
a separate portfolio of securities and other assets; and
WHEREAS, the Trust currently intends to offer units of beneficial
interest in eighteen portfolios, known as the Diversified Assets Portfolio,
Government Portfolio, Government Select Portfolio, Tax-Exempt Portfolio, U.S.
Treasury Index Portfolio, Short-Intermediate Bond Portfolio, Bond Portfolio,
Intermediate Bond Portfolio, Equity Index Portfolio, Small Company Index
Portfolio, Diversified Growth Portfolio, U.S. Government Securities Portfolio,
Short Duration Portfolio, Focused Growth Portfolio, Balanced Portfolio,
International Growth Portfolio, International Bond Portfolio and International
Equity Index Portfolio; such Portfolios (the "Current Portfolios) together
with all other portfolios subsequently established by the Trust and made subject
to this Agreement being herein collectively referred to as the "Portfolios"; and
WHEREAS, the Trust desires to retain the Administrator to act as
administrator of the Trust and the Administrator is willing to so act;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Appointment of Administrator. The Trust hereby appoints the
----------------------------
Administrator to act as administrator of the Trust for the periods and on the
terms herein set forth. The Administrator accepts such appointment and agrees
to render the services herein set forth, for the compensation herein provided.
2. Delivery of Documents. The Trust has delivered (or will
---------------------
deliver as soon as is possible) to the Administrator copies of each of the
following documents:
(a) Agreement and Declaration of Trust of the Trust dated as of July
15, 1982, together with all Amendments thereto (such Agreement
and Declaration of Trust, as currently in effect and as amended
from time to time, is herein called the "Trust Agreement"),
copies of which are also on file with the Secretary of The
Commonwealth of Massachusetts;
(b) By-Laws of the Trust (such By-Laws, as currently in effect and as
amended from time to time, are herein called the "By-Laws");
(c) Advisory Agreement between the Trust and The Northern Trust
Company ("North ern") (such Agreement, as currently in effect and
as amended and/or superseded from time to time, is herein called
the "Advisory Agreement");
(d) Custodian Agreement between the Trust and Northern;
<PAGE>
(e) Transfer Agency Agreement between the Trust and Northern;
(f) Prospectus and Statement of Additional Information of the
Trust (such Prospectus and Statement of Additional
Information, as presently in effect and as amended,
supplemented and/or superseded from time to time, is herein
called the "Prospectus" and "Statement of Additional
Information", respectively);
(g) Post Effective Amendment No. 34 to the Trust's Registration
Statement on Form N-1A (No. 2-80543) under the Securities Act
of 1933 (the "1933 Act") and Amendment No. 35 to the Trust's
Registration Statement on such form (No. 811-3605) under the
1940 Act filed as a single document with the Securities and
Exchange Commission (the "Commission") (such Registration
Statement, as presently in effect and as amended from time to
time, is herein called the "Registration Statement";
The Trust agrees to promptly furnish the Administrator from time to
time with copies of all amendments of or supplements to or otherwise current
versions of any of the foregoing documents not heretofore furnished.
3. Duties of Administrator.
-----------------------
(a) Subject to the general supervision of the Trustees
of the Trust, the Administrator:
(i) shall provide supervision of all aspects of the Trust's
operations (other than those referred to in paragraph
3(a) of the Advisory Agreement) (the parties giving due
recognition to the fact that certain of such operations
to be supervised are performed by Northern pursuant to
the Trust's agreements with Northern referred to in
paragraph 2 hereof);
(ii) shall, to the extent not provided pursuant to the
Trust's agreements with Northern referred to in
paragraph 2 hereof, provide the Trust with such
personnel as are reasonably necessary for the conduct of
the Trust's affairs;
(iii) shall, to the extent not provided pursuant to the
Trust's agreements with Northern referred to in
paragraph 2 hereof, arrange for (A) the preparation for
the Trust of all required tax returns, (B) the prepara
tion and submission of reports to existing Unitholders,
and (C) the periodic updating of the Prospectus and the
preparation of reports filed with the Commission and
other regulatory authorities (including qualification
under state securities or Blue Sky laws of the Trust's
Units);
(iv) shall, to the extent not provided pursuant to the
Trust's agreements with Northern referred to in
paragraph 2 hereof, provide the Trust with adequate
office space and all necessary office equipment and
services, including telephone service, heat, utilities,
stationery supplies and similar items, in Chicago,
Illinois;
<PAGE>
(v) shall prepare and implement the Trust's expense budgets,
accruals and amortizations.
(b) The Administrator, in the performance of its duties
hereunder, shall act in conformity with the Trust Agreement,
By-Laws, Registration Statement and Prospectus and Statement
of Additional Information and with the instructions and
directions of the Trustees of the Trust, and will use its
best efforts to conform to the requirements of the 1940 Act
and all other applicable federal and state laws, regulations
and rulings.
(c) The Administrator shall render to the Trustees of the Trust
such periodic and special reports as the Trustees may
reasonably request .
(d) The services of the Administrator hereunder are not deemed
exclusive and the Ad ministrator shall be free to render
similar services to others so long as its services under this
Agreement are not impaired thereby.
4. Expenses.
--------
(a) During the term of this Agreement, the Administrator will pay
all expenses incurred by it in connection with the
performance of its duties under paragraph 3 hereof, other
than the out-of-pocket cost of the preparations, submissions,
updatings and filings referred to in paragraph 3(a)(iii).
(b) If, in any fiscal year, the sum of a Portfolio's expenses
(including the fee payable pursuant to paragraph 5 hereof,
but excluding the investment advisory fee and transfer agency
fee payable to Northern pursuant to its agreements with the
Trust referred to in paragraph 2 hereof and servicing fees,
and extraordinary expenses such as taxes, interest, and
indemnification expenses) exceeds on an annualized basis .10%
of a Portfolio's average net assets (0.25% for each
International Portfolio, including the International Growth
Portfolio, International Bond Portfolio and International
Equity Index Portfolio) for such fiscal year, the
Administrator will reimburse each Portfolio for the amount of
such excess in accordance with the following timetable.
Expense reimbursements, if any, will be calculated and paid
monthly. The amount of the reimbursement paid by the
Administrator to each Portfolio will be computed as of the
end of each month by (1) determining the difference between
the Portfolio's estimated annualized expense ratio and the
above percentage limitation; (2) multiplying this percentage
by the Portfolio's average net asset value for such month to
obtain the cumulative dollar amount of such excess; [and (3)
subtracting from the cumulative dollar amount of such excess
the cumulative amount of reimbursements made to such
Portfolio by the Administrator since the beginning of the
fiscal year.] [A positive remainder represents the amount to
be paid by the Administrator to the Portfolio; a negative
remainder represents the amount to be paid by the Portfolio
to the Administrator.]
3
<PAGE>
(c) In the event that the reimbursements described in paragraph
(b) to the New Portfolios cause the aggregate net
administration fees actually earned by Goldman Sachs on
behalf of all the Fund's Portfolios during any fiscal year
pursuant to the Administration Agreement to be less than the
sum of (a) $1 million for the first 12 Portfolios that were
actively engaged in operations during any part of such fiscal
year plus (b) $50,000 for each additional Portfolio that was
actively engaged in operations during any part of such fiscal
year (the "Minimum Fee"), Northern agrees to pay to Goldman
Sachs, promptly following the close of each fiscal year of
the Fund, an amount equal to the difference between such
earned net administration fees and the Minimum Fee.
5. Compensation.
------------
(a) For the services provided and the expenses assumed by the
Administrator for each non-international Portfolio (which
include supervision with respect to the Trust's non-
investment advisory operations) pursuant to the Agreement,
the Trust will pay to the Administrator for as full
compensation therfor a fee at an annual rate of .10% of each
Portfolio's average daily net assets.
For the services provided and the expenses assumed by the
Administrator for an International Portfolio, including
International Growth Portfolio, International Bond Portfolio
and International Equity Index Portfolio (which include
supervision with respect to the Trust's non-investment
advisory operations) pursuant to the Agreement, the Trust
will pay to the Administra tor for as full compensation
therfor a fee at an annual rate of .25% of each Portfolio's
average daily net assets.
(b) The fee will be computed based on net assets on each day and
will be paid to the Administrator monthly.
6. Books and Records. The Administrator agrees to maintain such
-----------------
records with respect to its activities hereunder as may be required or as are
appropriate. The Administrator further agrees that all records which it
maintains for the Trust are the property of the Trust and it will surrender
promptly to the Trust any of such records upon the Trust's request.
7. Indemnification.
---------------
(a) The Trust hereby agrees to indemnify and hold harmless the
Administrator, its officers, partners and employees and each
person, if any, who controls the Adm inistrator (collectively
the "Indemnified Parties") against any and all losses,
claims, damages or liabilities, joint or several, to which
they or any of them may become subject under the 1933 Act,
the Securities Exchange Act of 1934, the 1940 Act or
4
<PAGE>
other federal or state statutory law or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material
fact or any omission or alleged omission to state a material fact
required to be stated or necessary to make the statements made not
misleading in the Registration Statement, the Prospectus or the
Statement of Additional Information, or any application or other
document filed in connection with the qualification of the Trust
or Units of any Portfolio under the Blue Sky or securities laws of
any jurisdiction ("Application"), excepy insofar as such losses,
claims, damages or liabilities (or actions in respect there of)
arise out of or are based upon any such untrue statement or
omission or alleged untrue statement or omission either pertaining
to a breach of the Administrator's duties in connection with this
Agreement or the Distribution Agreement of even date herewith
between the Adminis trator and the Trust, made in reliance upon
and in conformity with information furnished by or on behalf of
the Administrator for use in connection with the Registration
Statement, the Prospectus and Statement of Additional Information
or any Application, or
(ii) subject to clause (i) above, the Administrator acting hereunder or
under the Distribution Agreement of even date herewith between the
Administrator and the Trust;
and the Trust will reimburse each Indemnified Party for any legal or other
expenses incurred by such Indemnified Party in connection with
investigating or defending any such loss, claim, damage, liability or
action.
(b) If the indemnification provided for in paragraph 7(a) is due in
accordance with the terms of such paragraph but is for any reason held
by a court to be unavailable from the Trust, then the Trust shall
contribute to the aggregate amount paid or payable by the Trust and the
Indemnified Parties as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is
appropriate to reflect (i) the relative benefits received by the Trust
and such Indemnified Parties in connection with the operations of the
Trust, (ii) the relative fault of the Trust and such Indemnified
Parties, and (iii) any other relevant equitable considerations. The
Trust and the Administrator agree that it would not be just and
equitable if contribution pursuant to this subparagraph (b) were
determined by pro rata allocation or any other method of allocation
which does not take account of the equitable considerations referred to
above in this subparagraph (b). The amount paid or payable as a result
of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this subparagraph (b) shall be deemed to
include any legal or other expense incurred by the Trust and the
Indemnified Parties in connection with investigating or defending any
such loss, claim, damage, liability or action. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
(c) It is understood, however, that nothing in this paragraph 7 shall
protect any Indemnified Party against, or entitle any Indemnified Party
to indemnification against, or contribution with respect to, any
liability to the Trust or its Unit-holders to which
5
<PAGE>
such Indemnified Party is subject, by reason of its willful
misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of any reckless disregard of its obligations and
duties, under this Agreement or the Distribution Agreement, or
otherwise to an extent or in a manner inconsistent with Section 17 of
the 1940 Act.
8. Duration and Termination. Insofar as the holders of Units
------------------------
representing the interests in the Current Portfolios are affected by this
Agreement, it shall continue, unless sooner terminated as provided herein, until
April 30, 1998, and, insofar as the holders of Units representing the interests
in each of the other Portfolios are affected by this Agreement, it shall
continue until April 30 of the year following the year in which the Portfolio
becomes a Portfolio hereunder, and thereafter shall continue automatically for
periods of one year so long as each such latter continuance is approved at least
annually (a) by the vote of a majority of the Trustees of the Trust who are not
parties to this Agreement or interested persons (as defined by the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of voting on
such approval, and (b) by the Trustees of the Trust or by vote of a majority of
the outstanding Units (as defined with respect to voting securities in the 1940
Act) representing the interests in such Portfolio. This Agreement may be
terminated by the Trust as to any Portfolio at any time, without the payment of
any penalty, by vote of a majority of the Trustees of the Trust or by vote of a
majority of the outstanding Units (as so defined) representing the interests in
the Portfolio affected thereby on 60 days' written notice to the Administrator,
or by the Administrator at any time, without the payment of any penalty, on 60
days' written notice to the Trust. This Agreement will automatically and
immediately terminate in the event of its assignment (as defined by the 1940
Act).
9. Status of Administrator as Independent Contractor. The
-------------------------------------------------
Administrator shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided herein or authorized
by the Trustees of the Trust from time to time, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
The Administrator represents and warrants to the Trust that it is duly organized
as a New York limited partnership and is and at all times will remain duly
authorized and licensed to carry out its services as contemplated herein and in
its Distribution Agreement with the Trust.
10. Amendment of Agreement. This Agreement may be amended by mutual
----------------------
consent provided that such amendment is approved by vote of a majority of those
Trustees of the Trust who are not parties to this Agreement or interested
persons (as defined in the 1940 Act) of any such party, cast in person at a
meeting called for the purpose of voting on such amendment.
11. Unitholder Liability. This Agreement is executed by or on behalf
--------------------
of the Trust with respect to each of its Portfolios and the obligations
hereunder are not binding upon any of the Trustees, officers or Unitholders of
the Trust individually but are binding only upon the Portfolio to which such
obligations pertain and the assets and property of such Portfolio.
12. Miscellaneous. The Trust's Declaration of Trust as amended to
-------------
date is on file with the Secretary of The Commonwealth of Massachusetts. The
captions in this Agreement are included for convenience of reference only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be construed
in accordance with applicable federal law and (except as to paragraph 11 hereof
which shall be construed in accordance with the laws of The Commonwealth of
Massachusetts) the laws of the State of Illinois and shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
(subject to the last sentence of paragraph 8) and, to the extent provided in
paragraph 7 hereof, each Indemnified Party. Anything herein to the contrary
notwithstanding, this Agreement shall not be construed to require, or to impose
any duty upon, either of the parties to do anything in violation of any
applicable laws or regulations.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
THE BENCHMARK FUNDS
Attest: By:
As its:____________________________
Attest: GOLDMAN, SACHS & CO.
___________________________________
As Its:
THE NORTHERN TRUST
For purposes of paragraph 4(c) only
___________________________________
As Its:
7
<PAGE>
Exhibit 9(n)
THE BENCHMARK FUNDS
UNITHOLDER SERVICING PLAN
FOR SUBSERIES B, C AND D UNITS
Section 1. Upon the recommendation of The Northern Trust Company, the
----------
Trust's investment adviser ("Northern"), any officer of The Benchmark Funds (the
"Trust") is authorized to execute and deliver, in the name and on behalf of the
Trust, written agreements in substantially the forms attached hereto or in any
other forms duly approved by the Board of Trustees ("Servicing Agreements") with
various financial institutions and other organizations ("Servicing Agents") of
Subseries B, C and/or D Units of the Equity Index, Small Company Index,
Diversified Growth, Focused Growth, U.S. Treasury Index, U.S. Government
Securities, Short-Intermediate Bond, Bond, Balanced, International Growth,
International Bond, International Equity Index and Intermediate Bond Portfolios
(collectively the "Funds" or individually, a "Fund"). Such Servicing Agreements
shall require the Servicing Agents to provide, or to arrange to provide, support
services as set forth therein to their customers, clients, employees and others
("Clients") who beneficially own Units of beneficial interest in Subseries B, C
and/or D of one or more of the Funds ("Fund Units") in consideration for a fee,
computed daily and paid monthly in the manner set forth in the Servicing
Agreements, at the annual rate of up to .10%, .15% and .25% of the average daily
net asset value of Subseries B, C and/or D Units of a Fund, respectively, held
by the Servicing Agents on behalf of their Clients. All expenses incurred by the
Trust in connection with Servicing Agreements for Subseries B, C and/or D Units
of a particular Fund shall be allocated entirely to such Subseries B, C and/or D
Units of that particular Fund. The fee allocated to the Subseries B, C and/or D
Units of a particular Fund shall be the several (and not joint or joint and
several) obligation of each such Subseries of such Fund.
Section 2. Northern shall monitor the arrangements pertaining to the
----------
Trust's Servicing Agreements with Servicing Agents. Northern shall not, however,
be obliged by this Plan to recommend, and the Trust shall not be obliged to
execute, any Servicing Agreement with any qualifying Servicing Agent.
Section 3. So long as this Plan is in effect, Northern shall provide to
----------
the Trust's Board of Trustees, and the Trustees shall review, at least
quarterly, a written report of the amounts expended pursuant to this Plan and
the purposes for which such expenditures were made.
Section 4. This Plan shall become effective with respect to Subseries B, C
----------
and/or D Units of a particular Fund upon the approval of the Plan (and the
relevant form of Servicing Agreement attached hereto) by a majority of the Board
of Trustees, including a majority of the Trustees who are not "interested
persons" as defined in the Investment Company Act of 1940 (the "Act") of the
Trust and have no direct or indirect financial interest in the operation of this
Plan or in any Servicing Agreements or other agreements related to this Plan
(the "Disinterested Trustees"), pursuant to a vote cast in person at a meeting
called for the purpose of voting on the approval of this Plan (and relevant form
of Servicing Agreement) with respect to such Subseries B, C and/or D Units,
respectively.
Section 5. Unless sooner terminated, this Plan shall continue until April
----------
30, 1994 and thereafter shall continue automatically for successive annual
periods ending on April 30, provided such continuance is approved at least
annually in the manner set forth in Section 4.
Section 6. This Plan may be amended at any time by the Board of Trustees,
----------
provided that any material amendments of the terms of this Plan shall become
effective only upon the approval set forth in Section 4.
Section 7. This Plan is terminable at any time by vote of a majority of
----------
the Disinterested Trustees.
Section 8. While this Plan is in effect, the selection and nomination of
----------
those Trustees who are not "interested persons" (as defined in the Act) of the
Trust shall be committed to the discretion of the Disinterested Trustees.
<PAGE>
Section 9. The Trust has adopted this Shareholder Services Plan as of
----------
April 27, 1993 and revised this Plan as of April 22, 1997.
Section 10. All persons dealing with the Trust must look solely to the
-----------
Trust's property for the enforcement of any claims against the Trust, as neither
the Trustees, officers, agents nor unitholders of the Trust assume any personal
liability for obligation entered into on the Trust's behalf.
2
<PAGE>
FORM
----
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
SERVICING AGREEMENT
For Subseries B Units
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers, clients,
employees and others ("Customers") and other investors ("Investors")
(collectively "Clients") who may from time to time beneficially own units of
beneficial interest in Subseries B one or more of the portfolios which are
listed on Appendix A hereto (collectively the "Funds", and individually a
"Fund") offered by The Benchmark Funds ("Fund Units").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide or arrange for the provision of one or
more of the following services to Clients who may from time to time beneficially
own Fund Units: (1) establishing and maintaining separate account records of
Customers or other Investors; (2) providing Customers or other Investors with a
service that invests their assets in Fund Units pursuant to specific or
preauthorized instructions, and assistance with new account applications; (3)
aggregating and processing purchase and redemption requests for Fund Units from
Customers or other Investors, and placing purchase and redemption orders with
the Transfer Agent; (4) issuing confirmations to Customers or other Investors in
accordance with applicable law; (5) arranging for the timely transmission of
funds representing the net purchase price or redemption proceeds; (6) processing
dividend payments on behalf of Customers or other Investors; (7) providing
information periodically to Customers or other Investors showing their positions
in Fund units; (8) responding to Customer or other Investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other Investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to Fund Units beneficially owned by Customers or other Investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other Investors; (12) maintaining appropriate management reporting and
statistical information; (13) paying expenses related to the preparation of
educational and other explanatory materials in connection with the development
of investor services; (14) developing and monitoring investment programs; or
(15) providing such other similar services as the Trust may reasonably request
to the extent the Institutions are permitted to do so under applicable law,
rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as agent for, upon the order of, and for the account of,
your Clients.
Section 3. In performing your duties hereunder, you shall act in conformity
with the then effective prospectus and statement of additional information
applicable to the Fund Units, the Investment Company Act of 1940 and all other
applicable Federal and State banking, securities and other laws, regulations and
rulings. You will assume sole responsibility for your compliance with applicable
Federal and State laws and regulations, and shall rely exclusively upon your own
determination, or that of your legal advisers, that the performance
<PAGE>
of your duties hereunder complies with such laws and regulations. You shall
perform your duties hereunder in a manner consistent with the customs and
practices of other financial institutions that provide similar services.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide such services to
Clients.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or Fund Units except those
contained in our then current prospectuses for such units, copies of which will
be supplied by us to you, or in such supplemental literature or advertising as
may be authorized by us in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter, or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Fund Units by or on behalf of Clients. You and your
employees will upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
or arranged by you to be provided hereunder, we will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of .10% of the average
daily net asset value of the Fund Units beneficially owned by your Clients for
whom you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Fund Units"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this Section 7, the average daily net asset value of the Clients' Fund Units
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Fund Units for purposes of purchases and redemptions. The fee
rate stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion,
and without notice, suspend or withdraw the sale of Fund Units, including the
sale of such Units to you for the account of any Client or Clients.
Section 8. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law. You will be responsible for promptly
reporting to us and our Board of Trustees any potential or existing conflicts
with respect to the investments of your Clients in the Funds.
Section 9. We may enter into other similar Servicing Agreements with any
other person or persons without your consent.
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any Fund Units issued
by us; (ii) the compensation payable to you hereunder, together with any other
compensation payable to you by Clients in connection with the investment of
their assets in the Funds, will be disclosed by you to your Clients, will be
authorized by your Clients and will not result in an excessive or
2
<PAGE>
unreasonable fee to you; (iii) in the event an issue pertaining to this
Agreement or our Unitholder Servicing Plan related hereto is submitted for
approval, you will vote any Fund Units held for your own account in the same
proportion as the vote of the Fund Units held for your Clients' benefit; and
(iv) you will not engage in activities pursuant to this Agreement which
constitute acting as a broker or dealer under state law unless you have obtained
the licenses required by such law.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless
sooner terminated, this Agreement will continue until April 30, 1994, and
thereafter will continue automatically for successive annual periods ending on
April 30, provided such continuance is specifically approved at least annually
by us in the manner described in Section 15 hereof. This Agreement is
terminable, without penalty, at any time by us (which termination may be by vote
of a majority of our Disinterested Trustees as defined in Section 15 hereof, or
by you upon notice to the other party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown herein.
Section 13. This Agreement will be construed in accordance with the laws
of the State of Illinois and is non-assignable by the parties hereto.
Section 14. All persons dealing with us must look solely to our property
for the enforcement of any claims against us, as neither our Trustees, officers,
agents nor unitholders assume any personal liability for obligations entered
into on our behalf.
Section 15. This Agreement has been approved by vote of a majority of (i)
our Board of Trustees and (ii) those Trustees who are not "interested persons"
(as defined in the Investment Company Act of 1940) of us and have no direct or
indirect financial interest in the operation of the unitholder Servicing Plan
adopted by us regarding the provision of support services to the beneficial
owners of Fund Units or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 16. The Declaration of Trust establishing The Benchmark Funds,
dated July 15, 1982, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "The Benchmark Funds" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, unitholder, officer, employee or agent of The Benchmark Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said The Benchmark Funds, but the Trust Estate
only shall be liable.
3
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to [insert name and address].
Very truly yours,
THE BENCHMARK FUNDS
Date: _________________________ By:_________________________
Authorized Officer
Accepted and Agreed to:
Date: __________________________ By: ________________________
Authorized Officer
4
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Subseries B Units of The
Benchmark Funds for which you wish to act as Servicing Agent:
[ ] Equity Index Portfolio
[ ] Small Company Index Portfolio
[ ] Diversified Growth Portfolio
[ ] Focused Growth Portfolio
[ ] U. S. Treasury Index Portfolio
[ ] U. S. Government Securities Portfolio
[ ] Short-Intermediate Bond Portfolio
[ ] Bond Portfolio
[ ] Balanced Portfolio
[ ] International Growth Portfolio
[ ] International Bond Portfolio
[ ] International Equity Index Portfolio
[ ] Intermediate Bond Portfolio
5
<PAGE>
FORM
----
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
SERVICING AGREEMENT
For Subseries C Units
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers, clients,
employees and others ("Customers") and other investors ("Investors")
(collectively "Clients") who may from time to time beneficially own units of
beneficial interest in Subseries C of one or more of the portfolios which are
listed on Appendix A hereto (collectively the "Funds" and individually a "Fund")
offered by The Benchmark Funds ("Fund Units").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide or arrange for the provision of one or more
of the following services to Clients who may from time to time beneficially own
Fund Units: (1) establishing and maintaining separate account records of
Customers or other Investors; (2) providing Customers or other Investors with a
service that invests their assets in Fund Units pursuant to specific or
preauthorized instructions, and assistance with new account applications; (3)
aggregating and processing purchase and redemption requests for Fund Units from
Customers or other Investors, and placing purchase and redemption orders with
the Transfer Agent; (4) issuing confirmations to Customers or other Investors in
accordance with applicable law; (5) arranging for the timely transmission of
funds representing the net purchase price or redemption proceeds; (6) processing
dividend payments on behalf of Customers or other Investors; (7) providing
information periodically to Customers or other Investors showing their positions
in Fund Units; (8) responding to Customer or other Investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other Investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to Fund Units beneficially owned by Customers or other Investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other Investors; (12) providing such office space, facilities and personnel
as may be required to answer questions and respond to inquiries; (13)
maintaining appropriate management reporting and statistical information; (14)
paying expenses related to the preparation of educational and other explanatory
materials in connection with the development of investor services; (15)
developing and monitoring investment programs; or (16) providing such other
similar services as the Trust may reasonably request to the extent the
Institutions are permitted to do so under applicable law, rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as agent for, upon the order of, and for the account of,
your Clients.
Section 3. In performing your duties hereunder, you shall act in conformity
with the then effective prospectus and statement of additional information
applicable to the Fund Units, the Investment Company Act of 1940 and all other
applicable Federal and State banking, securities and other laws, regulations and
rulings.
<PAGE>
You will assume sole responsibility for your compliance with applicable Federal
and State laws and regulations, and shall rely exclusively upon your own
determination, or that of your legal advisers, that the performance of your
duties hereunder complies with such laws and regulations. You shall perform your
duties hereunder in a manner consistent with the customs and practices of other
financial institutions that provide similar services.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide such services to
Clients.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or Fund Units except those
contained in our then current prospectuses for such units, copies of which will
be supplied by us to you, or in such supplemental literature or advertising as
may be authorized by us in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter, or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Fund Units by or on behalf of Clients. You and your
employees will upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
or arranged by you to be provided hereunder, we will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of .15% of the average
daily net asset value of the Fund Units beneficially owned by your Clients for
whom you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Fund Units"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this Section 7, the average daily net asset value of the Clients' Fund Units
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Fund Units for purposes of purchases and redemptions. The fee
rate stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion,
and without notice, suspend or withdraw the sale of Fund Units, including the
sale of such Units to you for the account of any Client or Clients.
Section 8. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law. You will be responsible for promptly
reporting to us and our Board of Trustees any potential or existing conflicts
with respect to the investments of your Clients in the Funds.
Section 9. We may enter into other similar Servicing Agreements with any
other person or persons without your consent.
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any Fund Units issued
by us; (ii) the compensation payable to you hereunder, together with any other
2
<PAGE>
compensation payable to you by Clients in connection with the investment of
their assets in the Funds, will be disclosed by you to your Clients, will be
authorized by your Clients and will not result in an excessive or unreasonable
fee to you; (iii) in the event an issue pertaining to this Agreement or our
Unitholder Servicing Plan related hereto is submitted for approval, you will
vote any Fund Units held for your own account in the same proportion as the vote
of the Fund Units held for your Clients' benefit; and (iv) you will not engage
in activities pursuant to this Agreement which constitute acting as a broker or
dealer under state law unless you have obtained the licenses required by such
law.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until April 30, 1994, and thereafter
will continue automatically for successive annual periods ending on April 30,
provided such continuance is specifically approved at least annually by us in
the manner described in Section 15 hereof. This Agreement is terminable, without
penalty, at any time by us (which termination may be by vote of a majority of
our Disinterested Trustees as defined in Section 15 hereof, or by you upon
notice to the other party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown herein.
Section 13. This Agreement will be construed in accordance with the laws
of the State of Illinois and is non-assignable by the parties hereto.
Section 14. All persons dealing with us must look solely to our property
for the enforcement of any claims against us, as neither our Trustees, officers,
agents nor *unitholders assume any personal liability for obligations entered
into on our behalf.
Section 15. This Agreement has been approved by vote of a majority of (i)
our Board of Trustees and (ii) those Trustees who are not "interested persons"
(as defined in the Investment Company Act of 1940) of us and have no direct or
indirect financial interest in the operation of the Unitholder Servicing Plan
adopted by us regarding the provision of support services to the beneficial
owners of Fund Units or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 16. The Declaration of Trust establishing The Benchmark Funds,
dated July 15, 1982, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "The Benchmark Funds" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, unitholder, officer, employee or agent of The Benchmark Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said The Benchmark Funds, but the Trust Estate
only shall be liable.
3
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to [insert name and address].
Very truly yours,
THE BENCHMARK FUNDS
Date: _________________________ By: ________________________
Authorized Officer
Accepted and Agreed to:
Date: __________________________ By: _________________________
Authorized Officer
4
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Subseries B Units of The
Benchmark Funds for which you wish to act as Servicing Agent:
[ ] Equity Index Portfolio
[ ] Small Company Index Portfolio
[ ] Diversified Growth Portfolio
[ ] Focused Growth Portfolio
[ ] U. S. Treasury Index Portfolio
[ ] U. S. Government Securities Portfolio
[ ] Short-Intermediate Bond Portfolio
[ ] Bond Portfolio
[ ] Balanced Portfolio
[ ] International Growth Portfolio
[ ] International Bond Portfolio
[ ] International Equity Index Portfolio
[ ] Intermediate Bond Portfolio
5
<PAGE>
FORM
----
The Benchmark Funds
4900 Sears Tower
Chicago, Illinois 60606
SERVICING AGREEMENT
For Subseries D Units
Gentlemen:
We wish to enter into this Servicing Agreement with you concerning the
provision of administrative support services to your customers, clients,
employees and others ("Customers") and other investors ("Investors")
(collectively "Clients") who may from time to time beneficially own units of
beneficial interest in Subseries D of one or more of the portfolios which are
listed on Appendix A hereto (collectively the "Funds" and individually a "Fund")
offered by The Benchmark Funds ("Fund Units").
The terms and conditions of this Servicing Agreement are as follows:
Section 1. You agree to provide or arrange for the provision of one or more
of the following services to Clients who may from time to time beneficially own
Fund Units: (1) establishing and maintaining separate account records of
Customers or other Investors; (2) providing Customers or other Investors with a
service that invests their assets in Fund Units pursuant to specific or
preauthorized instructions, and assistance with new account applications; (3)
aggregating and processing purchase and redemption requests for Fund Units from
Customers or other Investors, and placing purchase and redemption orders with
the Transfer Agent; (4) issuing confirmations to Customers or other Investors in
accordance with applicable law; (5) arranging for the timely transmission of
funds representing the net purchase price or redemption proceeds; (6) processing
dividend payments on behalf of Customers or other Investors; (7) providing
information periodically to Customers or other Investors showing their positions
in Fund Units; (8) responding to Customer or other Investor inquiries (including
requests for prospectuses), and complaints relating to the services performed by
the institutions; (9) acting as liaison with respect to all inquiries and
complaints from Customers and other Investors relating to errors committed by
the Trust or its agents, and other matters pertaining to the Trust; (10)
providing or arranging for another person to provide subaccounting with respect
to Fund Units beneficially owned by Customers or other Investors; (11) if
required by law, forwarding unitholder communications from the Trust (such as
proxy statements and proxies, unitholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices) to Customers
and other Investors; (12) displaying and making prospectuses available on an
institution's premises; (13) providing such office space, facilities and
personnel as may be required to answer questions of potential investors and
respond to inquiries of Customers and other Investors; (14) maintaining
appropriate management reporting and statistical information; (15) paying
expenses related to the preparation of educational and other explanatory
materials in connection with the development of investor services; (16)
developing and monitoring investment programs; or (17) providing such other
similar services as the Trust may reasonably request to the extent the
Institutions are permitted to do so under applicable law, rules and regulations.
Section 2. We recognize that you may be subject to the provisions of the
Glass-Steagall Act and other laws governing, among other things, the conduct of
activities by Federally chartered and supervised banks and other banking
organizations. As such, you are restricted in the activities you may undertake
and for which you may be paid and, therefore, you will perform only those
activities which are consistent with your statutory and regulatory obligations.
You will act solely as agent for, upon the order of, and for the account of,
your Clients.
<PAGE>
Section 3. In performing your duties hereunder, you shall act in conformity
with the then effective prospectus and statement of additional information
applicable to the Fund Units, the Investment Company Act of 1940 and all other
applicable Federal and State banking, securities and other laws, regulations and
rulings. You will assume sole responsibility for your compliance with applicable
Federal and State laws and regulations, and shall rely exclusively upon your own
determination, or that of your legal advisers, that the performance of your
duties hereunder complies with such laws and regulations. You shall perform your
duties hereunder in a manner consistent with the customs and practices of other
financial institutions that provide similar services.
Section 4. You will provide such office space and equipment, telephone
facilities and personnel (which may be any part of the space, equipment and
facilities currently used in your business, or any personnel employed by you) as
may be reasonably necessary or beneficial in order to provide such services to
Clients.
Section 5. Neither you nor any of your officers, employees or agents are
authorized to make any representations concerning us or Fund Units except those
contained in our then current prospectuses for such units, copies of which will
be supplied by us to you, or in such supplemental literature or advertising as
may be authorized by us in writing.
Section 6. For all purposes of this Agreement you will be deemed to be an
independent contractor, and will have no authority to act as agent for us in any
matter, or in any respect. By your written acceptance of this Agreement, you
agree to and do release, indemnify and hold us harmless from and against any and
all direct or indirect liabilities or losses resulting from requests,
directions, actions or inactions of or by you or your officers, employees or
agents regarding your responsibilities hereunder or the purchase, redemption,
transfer or registration of Fund Units by or on behalf of Clients. You and your
employees will upon request, be available during normal business hours to
consult with us or our designees concerning the performance of your
responsibilities under this Agreement.
Section 7. In consideration of the services and facilities provided by you
or arranged by you to be provided hereunder, we will pay to you, and you will
accept as full payment therefor, a fee at the annual rate of .25% of the average
daily net asset value of the Fund Units beneficially owned by your Clients for
whom you are the dealer of record or holder of record or with whom you have a
servicing relationship (the "Clients' Fund Units"), which fee will be computed
daily and payable monthly. For purposes of determining the fees payable under
this Section 7, the average daily net asset value of the Clients' Fund Units
will be computed in the manner specified in our registration statement (as the
same is in effect from time to time) in connection with the computation of the
net asset value of Fund Units for purposes of purchases and redemptions. The fee
rate stated above may be prospectively increased or decreased by us, in our sole
discretion, at any time upon notice to you. Further, we may, in our discretion,
and without notice, suspend or withdraw the sale of Fund Units, including the
sale of such Units to you for the account of any Client or Clients.
Section 8. Any person authorized to direct the disposition of monies paid
or payable by us pursuant to this Agreement will provide to our Board of
Trustees, and our Trustees will review, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
In addition, you will furnish us or our designees with such information as we or
they may reasonably request (including, without limitation, periodic
certifications confirming the provision to Clients of the services described
herein), and will otherwise cooperate with us and our designees (including,
without limitation, any auditors designated by us), in connection with the
preparation of reports to our Board of Trustees concerning this Agreement and
the monies paid or payable by us pursuant hereto, as well as any other reports
or filings that may be required by law. You will be responsible for promptly
reporting to us and our Board of Trustees any potential or existing conflicts
with respect to the investments of your Clients in the Funds.
Section 9. We may enter into other similar Servicing Agreements with any
other person or persons without your consent.
2
<PAGE>
Section 10. By your written acceptance of this Agreement, you represent,
warrant and agree that: (i) in no event will any of the services provided by you
hereunder be primarily intended to result in the sale of any Fund Units issued
by us; (ii) the compensation payable to you hereunder, together with any other
compensation payable to you by Clients in connection with the investment of
their assets in the Funds, will be disclosed by you to your Clients, will be
authorized by your Clients and will not result in an excessive or unreasonable
fee to you; (iii) in the event an issue pertaining to this Agreement or our
Unitholder Servicing Plan related hereto is submitted for approval, you will
vote any Fund Units held for your own account in the same proportion as the vote
of the Fund Units held for your Clients' benefit; and (iv) you will not engage
in activities pursuant to this Agreement which constitute acting as a broker or
dealer under state law unless you have obtained the licenses required by such
law.
Section 11. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by us or our designee. Unless sooner
terminated, this Agreement will continue until April 30, 1994, and thereafter
will continue automatically for successive annual periods ending on April 30,
provided such continuance is specifically approved at least annually by us in
the manner described in Section 15 hereof. This Agreement is terminable, without
penalty, at any time by us (which termination may be by vote of a majority of
our Disinterested Trustees as defined in Section 15 hereof, or by you upon
notice to the other party hereto.
Section 12. All notices and other communications to either you or us will
be duly given if mailed, telegraphed, telexed or transmitted by similar
telecommunications device to the appropriate address shown herein.
Section 13. This Agreement will be construed in accordance with the laws of
the State of Illinois and is non-assignable by the parties hereto.
Section 14. All persons dealing with us must look solely to our property
for the enforcement of any claims against us, as neither our Trustees, officers,
agents nor unitholders assume any personal liability for obligations entered
into on our behalf.
Section 15. This Agreement has been approved by vote of a majority of (i)
our Board of Trustees and (ii) those Trustees who are not "interested persons"
(as defined in the Investment Company Act of 1940) of us and have no direct or
indirect financial interest in the operation of the unitholder Servicing Plan
adopted by us regarding the provision of support services to the beneficial
owners of Fund Units or in any agreements related thereto ("Disinterested
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
Section 16. The Declaration of Trust establishing The Benchmark Funds,
dated July 15, 1982, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts. The name "The Benchmark Funds" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, unitholder, officer, employee or agent of The Benchmark Funds, shall
be held to any personal liability, nor shall resort be had to their private
property for the satisfaction of any obligation or claim or otherwise in
connection with the affairs of said The Benchmark Funds, but the Trust Estate
only shall be liable.
3
<PAGE>
If you agree to be legally bound by the provisions of this Agreement,
please sign a copy of this letter where indicated below and promptly return it
to [insert name and address].
Very truly yours,
THE BENCHMARK FUNDS
Date: _________________________ By:__________________________
Authorized Officer
Accepted and Agreed to:
Date: __________________________ By: __________________________
Authorized Officer
4
<PAGE>
APPENDIX A
Please check the appropriate boxes to indicate the Subseries B Units of The
Benchmark Funds for which you wish to act as Servicing Agent:
[ ] Equity Index Portfolio
[ ] Small Company Index Portfolio
[ ] Diversified Growth Portfolio
[ ] Focused Growth Portfolio
[ ] U. S. Treasury Index Portfolio
[ ] U. S. Government Securities Portfolio
[ ] Short-Intermediate Bond Portfolio
[ ] Bond Portfolio
[ ] Balanced Portfolio
[ ] International Growth Portfolio
[ ] International Bond Portfolio
[ ] International Equity Index Portfolio
[ ] Intermediate Bond Portfolio
5
<PAGE>
Exhibit 11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our Firm
under the caption "Additional Trust Information -Counsel and Auditors" in the
Statement of Additional Information included in Post-Effective Amendment No. 34
to the Registration Statement (1933 Act No. 2-80543; 1940 Act No. 811-3605) on
Form N-1A under the Securities Act of 1933, as amended, of The Benchmark Funds.
This consent does not constitute a consent under section 7 of the Securities Act
of 1933, and in consenting to the use of our name and the references to our Firm
under such caption we have not certified any part of the Registration Statement
and do not otherwise come within the categories of persons whose consent is
required under said section 7 or the rules and regulations of the Securities and
Exchange Commission thereunder.
/s/ Drinker Biddle & Reath LLP
----------------------------------
Drinker Biddle & Reath LLP
Philadelphia, Pennsylvania
May 12, 1997
<PAGE>
Exhibit 11(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Counsel and
Auditors" and "Financial Statements" and to the incorporation by reference of
our report dated January 21, 1997 with respect to the Bond, International Bond,
Short Duration, Short-Intermediate Bond, U.S. Government Securities and U.S.
Treasury Index Portfolios, comprising the Fixed Income Portfolios of the
Benchmark Funds, in the Registration Statement (Form N-1A) of The Benchmark
Funds filed with the Securities and Exchange Commission in this Post-Effective
Amendment No. 34 to the Registration Statement under the Securities Act of 1933
(Registration No. 2-80543) and in this Amendment No. 35 to the Registration
Statement under the Investment Company Act (Registration No. 811-3605).
ERNST & YOUNG LLP
Chicago, Illinois
May 13, 1997
<PAGE>
EXHIBIT 99.18
BENCHMARK FUNDS
(THE "COMPANY")
PLAN PURSUANT TO RULE 18F-3 FOR OPERATION OF
A MULTI-CLASS SYSTEM
----------------------------
I. INTRODUCTION
---------------
On February 23, 1995, the Securities and Exchange Commission (the
"Commission") adopted Rule 18f-3 under the Investment Company Act of 1940, as
amended (the "1940 Act"), which permits the creation and operation of a multi-
class distribution structure without the need to obtain an exemptive order under
Section 18 of the 1940 Act. Rule 18f-3, which became effective on April 3,
1995, requires an investment company to file with the Commission a written plan
specifying all of the differences among classes, including the various services
offered to shareholders, different distribution arrangements for each class,
methods for allocating expenses relating to those differences and any conversion
features or exchange privileges. Previously, the Company operated a multi-class
distribution structure pursuant to an exemptive order granted by the Commission
on May 26, 1993. On July 11, 1995 the Board of Trustees of the Company
authorized the Company to operate its current multi-class distribution structure
in compliance with Rule 18f-3. This Plan became effective upon its original
filing with the Securities and Exchange Commission.
II. ATTRIBUTES OF CLASSES
-------------------------
A. Generally
---------
The Company will initially offer four classes of units-- Class A,
Class B, Class C and Class D units -- in the U.S. Government Securities, Short-
Intermediate Bond, U.S. Treasury Index, Bond, International Bond and
Intermediate Bond Portfolios (each a "Portfolio," collectively, the "Fixed
Income Portfolios") and in the Balanced, Equity Index, Diversified Growth,
Focused Growth, Small Company Index, International Growth and International
Equity Index Portfolios (each a "Portfolio," collectively, the "Equity
Portfolios").
In general, shares of each class will be identical except for
different expense variables (which will result in different returns for each
class), certain related rights and certain transfer agency and shareholder
services. More particularly, Class A, Class B, Class C and Class D units of
each Portfolio will represent interests in the same portfolio of investments of
the particular Portfolio, and will be identical in all respects, except for: (a)
the impact of (i) expenses assessed to a class pursuant to the unitholder
servicing plan (the "Non-
<PAGE>
12b-1 Plan") adopted for that class, (ii) transfer agency fees and (iii) any
other incremental expenses identified from time to time that should be properly
allocated to one class so long as any changes in expense allocations are
reviewed and approved by a vote of the Board of Trustees, including a majority
of the independent Trustees; (b) the fact that a class will vote separately on
any matter submitted to shareholders that pertains to (i) the Non-12b-1 Plan
adopted for that class or (ii) class expenses borne by that class; (c) the
different exchange privileges of each class of units; (d) the designation of
each class of units of a Portfolio; and (e) the different transfer agency and
shareholder services relating to a class of units.
B. Distribution Arrangements/Shareholder Services/Expenses.
--------------------------------------------------------
Sales Charges
-------------
CLASS A UNITS
Class A units of each Portfolio will be available for purchase by The
Northern Trust Company, its affiliates and other institutions and organizations
(collectively, the "Institutions") acting on behalf of their customers, clients,
employees and others (the "Customers") and for their own account. Class A units
of each Portfolio will be available for purchase, as described from time to time
in the Company's Prospectuses and Statements of Additional Information, by
Institutions directly or through procedures established in connection with the
requirements of their qualified accounts.
Class A units of each Portfolio initially will be designed to be
purchased by institutional investors or others who can obtain information about
their unitholder accounts and who do not require the transfer agent or servicing
agent services that are provided to Class B, C and D unitholders.
Class A units of each Portfolio will not be subject to a sales charge;
but Class A units of the Small Company Index Portfolio and International Equity
Index Portfolio will be subject to an additional purchase price amount initially
not exceeding .75% and 1.00%, respectively, of the net asset value of the Class
A units purchased. Class A units will not be subject to a fee payable pursuant
to the Non-12b-1 plan.
CLASS B, C AND D UNITS
Class B, C and D units of each Portfolio will be available for
purchase by Institutions acting on behalf of Customers and for their own
account. Class B, C and D units will be available for purchase, as described
from time to time in the Company's Prospectuses and Statement of Additional
Information,
-2-
<PAGE>
by Institutions directly or through procedures established in connection with
the requirements of their qualified accounts.
Class B units of each Portfolio initially will be designed to be
purchased by organizations maintaining record ownership on behalf of beneficial
owners where certain services of the Company's transfer agent and a servicing
agent are required that are incident to the separation of record and beneficial
ownership. Class C units of each Portfolio will initially be designed to be
purchased by institutional investors which require certain account-related
services of the Company's transfer agent and a servicing agent that are incident
to the investor being the beneficial owner of units. Class D units of each
Portfolio will initially be designed to be purchased by investors having a
relationship with an organization which requires that account-related services
and information be provided to the investor and organization by the Company's
transfer agent and a servicing agent.
Class B, C and D units of each Portfolio will not be subject to a
sales charge; but each class of units of the Small Company Index Portfolio and
International Equity Index Portfolio will be subject to an additional purchase
price amount initially not exceeding .75% and 1.00%, respectively, of the net
asset value of the units purchased. In addition, Class B, C and D units will be
subject to a fee payable pursuant to the Non-12b-1 Plan which will not exceed
the annual rate of .10%, .15% and .25% of the average daily net asset value of
the outstanding units of the respective classes which are held by or serviced by
certain servicing agents for beneficial owners of units.
Services provided or arranged to be provided under the Non-12b-1 Plan
adopted for a class of units may include: (i) establishing and maintaining
separate account records of Customers or other investors; (ii) providing
Customers or other investors with a service that invests their assets in units
of certain classes pursuant to specific or pre-authorized instructions, and
assistance with new account applications; (iii) aggregating and processing
purchase and redemption requests for units of certain classes from Customers or
other investors, and placing purchase and redemption orders with the Company's
transfer agent; (iv) issuing confirmations to Customers or other investors in
accordance with applicable law; (v) arranging for the timely transmission of
funds representing the net purchase price or redemption proceeds; (vi)
processing dividend payments on behalf of Customers or other investors; (vii)
providing information periodically to Customers or other investors showing their
positions in units; (viii) responding to Customer or other investor inquiries
(including requests for prospectuses), and complaints relating to the services
performed by the Institutions; (ix) acting as liaison with respect to all
inquiries and complaints from Customers and other investors
-3-
<PAGE>
relating to errors committed by the Company or its agents, and other matters
pertaining to the Company; (x) providing or arranging for another person to
provide subaccounting with respect to units of certain classes beneficially
owned by Customers or other investors; (xi) if required by law, forwarding
unitholder communications from the Company (such as proxy statements and
proxies, unitholder reports, annual and semi-annual financial statements and
dividend, distribution and tax notices) to Customers and other investors; (xii)
providing such office space, facilities and personnel as may be required to
perform its services under the Non-12b-1 Plan; (xiii) maintaining appropriate
management reporting and statistical information; (xiv) paying expenses related
to the preparation of educational and other explanatory materials in connection
with the development of investor services; (xv) developing and monitoring
investment programs; and (xvi) providing such other similar services as the
Company may reasonably request to the extent the Institutions are permitted to
do so under applicable statutes, rules and regulations.
C. Exchange Privileges
-------------------
Institutions and, to the extent permitted by their account agreements,
Customers generally will be permitted to exchange Class A, B, C and D units of a
Portfolio for Class A, B, C or D units, respectively, of another Portfolio of
the Company as to which the Institution or Customer maintains an existing
account with an identical title.
D. Methodology for Allocating Expenses Among Classes
-------------------------------------------------
Expenses of a Portfolio are classified as being either joint or class-
specific.
Joint expenses of a Portfolio are allocated daily to each class of
units of such Portfolio in accordance with Rule 18f-3(c). Class-specific
expenses of a Portfolio are allocated to the specific class of units of such
Portfolio.
Adopted: July 11, 1995
Revised: April 22, 1997
-4-
<PAGE>
EXHIBIT 19
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, William H. Springer,
hereby constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven E.
Hartstein, Paul Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his/her attorneys-in-fact, each with power of substitution, for him/her in any
and all capacities, to sign the Registration Statement under the Securities Act
of 1933 and the Investment Company Act of 1940 of The Benchmark Funds and any
and all amendments to such Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
DATED: January 22, 1997
/s/ William H. Springer
- -------------------------------
William H. Springer
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, John W. English,
hereby constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven E.
Hartstein, Paul Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his/her attorneys-in-fact, each with power of substitution, for him/her in any
and all capacities, to sign the Registration Statement under the Securities Act
of 1933 and the Investment Company Act of 1940 of The Benchmark Funds and any
and all amendments to such Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
DATED: January 22, 1997
/s/ John W. English
- -------------------------------
John W. English
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, James J. Gavin, Jr.,
hereby constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven E.
Hartstein, Paul Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his/her attorneys-in-fact, each with power of substitution, for him/her in any
and all capacities, to sign the Registration Statement under the Securities Act
of 1933 and the Investment Company Act of 1940 of The Benchmark Funds and any
and all amendments to such Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
DATED: January 22, 1997
/s/ James J. Gavin, Jr.
- -------------------------------
James J. Gavin, Jr.
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Frederick T. Kelsey,
hereby constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven E.
Hartstein, Paul Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his/her attorneys-in-fact, each with power of substitution, for him/her in any
and all capacities, to sign the Registration Statement under the Securities Act
of 1933 and the Investment Company Act of 1940 of The Benchmark Funds and any
and all amendments to such Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
DATED: January 22, 1997
/s/ Frederick T. Kelsey
- ---------------------------------
Frederick T. Kelsey
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Edward J. Condon,
Jr., hereby constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven
E. Hartstein, Paul Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his/her attorneys-in-fact, each with power of substitution, for him/her in any
and all capacities, to sign the Registration Statement under the Securities Act
of 1933 and the Investment Company Act of 1940 of The Benchmark Funds and any
and all amendments to such Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
DATED: January 22, 1997
/s/ Edward J. Condon, Jr.
- ---------------------------
Edward J. Condon, Jr.
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Richard P. Strubel,
hereby constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven E.
Hartstein, Paul Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski,
Michael J. Richman, Howard B. Surloff and Pauline Taylor, jointly and severally,
his/her attorneys-in-fact, each with power of substitution, for him/her in any
and all capacities, to sign the Registration Statement under the Securities Act
of 1933 and the Investment Company Act of 1940 of The Benchmark Funds and any
and all amendments to such Registration Statement, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue thereof.
DATED: January 22, 1997
/s/ Richard P. Strubel
- --------------------------------------
Richard P. Strubel
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Paul Klug, hereby
constitutes and appoints Deborah A. Farrell, Scott M. Gilman, Steven E.
Hartstein, John W. Mosior, Nancy L. Mucker, John M. Perlowski, Michael J.
Richman, Howard B. Surloff and Pauline Taylor, jointly and severally, his/her
attorneys-in-fact, each with power of substitution, for him/her in any and all
capacities, to sign the Registration Statement under the Securities Act of 1933
and the Investment Company Act of 1940 of The Benchmark Funds and any and all
amendments to such Registration Statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue thereof.
DATED: January 22, 1997
/s/ Paul Klug
- -------------------------------------
Paul Klug
<PAGE>
THE BENCHMARK FUNDS
POWER OF ATTORNEY
-----------------
Know All Men by These Presents, that the undersigned, Scott M. Gilman,
hereby constitutes and appoints Deborah A. Farrell, Steven E. Hartstein, Paul
Klug, John W. Mosior, Nancy L. Mucker, John M. Perlowski, Michael J. Richman,
Howard B. Surloff and Pauline Taylor, jointly and severally, his/her attorneys-
in-fact, each with power of substitution, for him/her in any and all capacities,
to sign the Registration Statement under the Securities Act of 1933 and the
Investment Company Act of 1940 of The Benchmark Funds and any and all amendments
to such Registration Statement, and to file the same, with exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-
fact, or his or her substitute or substitutes, may do or cause to be done by
virtue thereof.
DATED: January 22, 1997
/s/ Scott M. Gilman
- ---------------------------------------------
Scott M. Gilman
